Answer To The Quiz

In a previous post, I proposed a simple problem and a question. Here it is again:

Let's say you make $5000 a month. However, over the last decade you have been spending $7000 a month. So you've built yourself quite a little debt pile. Okay, now times are tough and you decide that you need to cut your spending. You decide to cut your spending to $5500 a month.

Here's the quiz: Will you get out of debt?

Now it should be obvious that the answer is no. Even though you have cut your spending, you are still spending more than you are earning.  Therefore, you are not decreasing your debt, you are actually increasing it.

So here is the same quiz in a different context.  When United States politicians proudly inform us that they will trim the budget deficit from the $1.75 trillion this year to about $500 billion by about 2012 (give or take a few years), will we finally start paying off the national debt of over $11 trillion?  Even if they keep their promise, the answer again is obviously no.  Trimming a budget deficit does the national debt no good because we are still racking up debt.

So the next time a politician starts rambling about cutting the deficit, ask him/her what their plan is to create a surplus to pay off the national debt.  That should stump them good.