The Heritage Foundation released a new graphic showing what it would look like if a typical family spent money like the federal government. This creative example describes the type of debt that the government is taking on. Brad Plumer at the Washington Post expanded on this by explaining what else would be true if a fictional family (the Smiths) really did spend like the federal government. Some of the points included:
- The Smiths would spend 20 percent of their budget, or $12,800 each year, on an arsenal of guns, tanks and drones to defend their house against threats or to invade the occasional neighbor over lawn-pesticide disputes and access to the gas station.
- The Smiths would spend another third of their income financing retirement and health care for Grandma and Grandpa. Part of that would have been prepaid by money that Grandma and Grandpa socked away while they were working, but some of it would be paid for by the parents and kids who are chipping in.
- Actually, come to think of it, the Smiths spend nearly half their money — 43 percent — operating a massive insurance conglomerate whose main beneficiaries are family members.
- Over the past few years, the Smiths have been able to borrow a vast amount of cash at negative interest rates. Banks have essentially been paying the family to hold their money. That’s partly because everyone assumes the Smiths are more or less immortal and will always be good for it. They’re the wealthiest, most dependable family in a neighborhood full of upstarts and imploding Greek restaurants. Plus they have all those tanks.
- The Smiths, by the way, own their own printing press. For whatever reason, it’s totally legal for them to print more money, although they have to be selective about this. This makes it very unlikely that they’d ever default.
- Of the $312,000 that the Smith parents have borrowed so far, about 47 percent of that is owed to outsiders, including the Chens down the street. But much of the rest they borrow from their kids with a promise to repay.
- The Smiths could also, crucially, tap into the kids’ extra income from their lucrative million-dollar lemonade stand business if they ever wanted to whittle down the debt, although this would come up for a family vote and the kids aren’t keen on this.
The Bottom Line: The U.S. Federal Government has a spending problem and with the upcoming debt ceiling looming, adding gold to your retirement provides diversification and purchasing power protection. To learn more about your options for rolling over your old 401(k) or existing IRA to a Gold IRA with a trusted name in the industry, contact American Bullion at 1-800-326-9598 today.
Heritage Foundation calculations based on data from the Congressional Budget Office, Updated Budget Projections: Fiscal Years 2013 to 2023, May 2013, http://www.cbo.gov/publication/44172 (accessed May 15, 2013).