FedUpUSA

The Federal Budget 101

By: David Thomas
Chief Executive Officer
Equitas Capital Advisors LLC

The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let’s put the 2011 federal budget into perspective:

  • U.S. income: $2,170,000,000,000
  • Federal budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

It helps to think about these numbers in terms that we can relate to. Let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.

 

  • Total annual income for the Jones family: $21,700
  • Amount of money the Jones family spent: $38,200
  • Amount of new debt added to the credit card: $16,500
  • Outstanding balance on the credit card: $142,710
  • Amount cut from the budget: $385

So in effect last month Congress, or in this example the Jones family, sat down at the kitchen table and agreed to cut $385 from its annual budget. What family would cut $385 of spending in order to solve $16,500 in deficit spending?

It is a start, although hardly a solution.

Now after years of this, the Jones family has $142,710 of debt on its credit card (which is the equivalent of the national debt).

You would think the Jones family would recognize and address this situation, but it does not. Neither does Congress.

The root of the debt problem is that the voters typically do not send people to Congress to save money. They are sent there to bring home the bacon to their own home state.

To effect budget change, we need to change the job description and give Congress new marching orders.

It is awfully hard (but not impossible) to reverse course and tell the government to stop borrowing money from our children and spending it now.

In effect, what we have is a reverse mortgage on the country. The problem is that the voters have become addicted to the money. Moreover, the American voters are still in the denial stage, and do not want to face the possibility of going into rehab.

To: David Thomas
From: Catherine Austin Fitts, Solari Inc.
Re: Federal Budget 101

David:

Thank you for your comments. I believe you may want to add a few items to your marvelous presentation:

  • The Jones family numbers presented are not reliable. They have refused to produce audited financial statements as required by law for fifteen years. Mysteriously, their bankers continue to operate their account and credit card companies continue to extend credit despite this absence of proper accounting and disclosure.
  • The Jones family bank accounts do not balance. In fact their banks have reported undocumentable adjustments of over $40,000 and no one knows where the money went. The banks have promised it will not happen in the future, but have made no effort to find out what happened or to return missing funds.
  • There are significant allegations of collateral fraud in their mortgage borrowings. It appears their covert revenues have been far in excess of what has been reported and their debt as a result of fraudulent mortgages may be greater by many multiples than their stated mortgage payable. It appears the fraudulent mortgages may have been packaged into securities by their banks and sold to the Jones pension plan.
  • Over the last two years, the Jones made gifts and loans to their banks of $270,000 as a result of threats that their finances would otherwise collapse. They did not get a report or accounting on how the funds were used.
  • The purchasing power of the Jones savings and income dropped by approximately 50% from 2003 to 2008, and probably by a similar amount since then. Their banks are able to print money that debases them. They have no power to stop it.
  • The Jones’ banks have used the lending power from their deposits in combination with gifts and loans to finance the shift of the manufacturing base abroad to profit from cheaper labor and to hire lobbyists to ensure that tax rules are such that they do not have to be pay taxes in the US. As a result, it is anticipated that the Jones are likely to lose their jobs in the reasonably near future. Given the possibility of cutbacks in unemployment and other governmental programs, it is not clear how they will fund their daily expenses no matter how much they reduce their budget.

Is the problem that the Jones need to cut back or that the entire financial ecosystem needs to be illuminated and reengineered, including a return of funds stolen and misappropriated by the banks?

Catherine Austin Fitts
Solari, Inc.

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