Here’s How the Ballooning Federal Deficit Affects Your Household Income

Business Insider
12/10/2010

Earlier this year, we posted a chart that illustrated the biggest single political issue of 2010, which revealed the near-complete disconnect that has developed since 2007 between the federal government’s spending and the median income of American households. Today, we’re going to take you deeper into that issue because rectifying that unsustainable situation will affect the lives of every single American.

The Biggest Single Issue of 2010 In One Chart

Click on the image for a full-size view.

We’ll begin by revisiting a very slightly modified version of our “biggest issue” chart to give you a better idea of why we designed it to look the way it does.

As you can see, we’ve shown how the U.S. federal government’s total spending has changed with respect to the level of the median U.S. household’s income in every year from 1967 through 2009.

While the United States’ historic federal expenditure data goes back to the nation’s founding, the median household income data only goes back to 1967, which limited our ability to show the relationship between the two before that time. And then, the only reason we didn’t go past 2009 is because the Census won’t report the median household income for 2010 until October 2011! Not that we didn’t take a stab at projecting what median household income will turn out to have been for 2010….

The Link Between Median Household Income and Federal Deficits

…if the U.S. Congress had reduced its annual spending by $570.75 per household in the years from 1967 through 2001, the U.S. federal government’s budget would have been in balance or nearly so over most of that time…

…Our analysis also confirms that it is the amount of federal spending, and not changes in federal tax rates, that is primarily responsible for the current unsustainable fiscal situation of the United States. This is especially true given how exceptionally stable the level of median household income has been after adjusting for the effect of inflation since 1997, even though federal tax rates have changed significantly over that time.