In a new effort to turn the country’s debt and deficits into political problems for President Obama, Mitt Romney’s campaign is promoting a new infographic that draws a comparison between federal and household budgets.
It may be a political winner, but it’s a deeply flawed way to look at budgeting, as even many conservative budget experts admit. And it rests on the false implication that President Obama has no intention or desire to rein in deficits in the coming years.
But it breaks down further when you examine the analogy more closely — and, as Dean Baker, co-founder of the liberal-leaning Center for Economic and Policy Research says, it suggest either that Romney’s misleading voters about his policy views, or that he has a “loony” view of the economy.Romney posits a hypothetical family, whose income and liabilities are derived by dividing federal revenue, spending, deficits and debt by $100 million. That leaves us with a very poor family of four — surviving on $24,686 a year — struggling with $163,509 in debt.
That’s a big problem! Or is it?
Setting aside the specific figures, the idea here is that no household of modest means would ever come close to racking up the same income-to-debt ratio the federal government has right now.
According to Federal Reserve and Census data, that’s not really true — the average household, which houses about 2.5 people, has over $100,000 in outstanding debt, including mortgage debt.
Separately, the presentation is premised on the notion that Obama completely owns the country’s budget, and politically perhaps he does. But the national debt is cumulative — Obama inherited most of it — and its growth during his presidency is overwhelmingly due to the 2008 economic crisis, which caused tax revenues to plunge and safety-net spending to rise automatically.
As Baker points out, that’s as it should be — and if Romney truly thinks the budget should have been brought to balance in the recession, that should set off alarm bells.
“The budget moves toward deficit every time we have a downturn. That’s a good thing, because it sustains demand into the economy,” he said. “So either he’s making an issue out of something he knows not to be an issue, or he has a loony view about the economy.”
“Families have a lot of debt, but we’re not a family,” Baker said. “We have access to endless supplies of credit. “There is no issue of the government being able to pay off its debt — if there is, he better tell his friends in the financial sector, because they don’t seem to think so.”
The Romney camp infographic presents a snapshot of the budget at a low point. As the economy recovers, revenue will decline, spending will fall and the sky-high ratios being highlighted here — which really aren’t as high as they seem — will start to come down to Earth.