Everyone seems to agree these days that having a handle on the numbers helps you more effectively manage an activity. In my earlier life as a practicing CPA, I was amazed by how few people had a handle on their own personal analytics. They didn’t know the amount of their net-of-tax income; the amount of their annual household expenses; their debt-to-income ratio; or their marginal or effective income tax rates. Needless to say, the people who didn’t know these metrics tended to have expenses in excess of their revenue and ended up financing their lifestyle with a high debt-to-income ratio.
This causes me to reflect on whether the average taxpayer has a handle on the metrics of their own country, so let’s have a test to see how well you know your own country’s metrics before you enter the voting booth. (answers below)
- GDP: What is the annual GDP of the USA? All measurement really starts here. We gauge our booms and recessions by how this number is growing (or shrinking). It shrank by 2.3% last year, and the private industry shrank a staggering 23% in investment spending. The good news is that the GDP has been growing the last couple of quarters, and we are still the big dog, as our GDP is three times the size of China’s (but they are gaining fast).
- Annual Government Expenses: How much do the folks in Washington spend? This year it is projected to be a staggering 26% of GDP, one-fourth of our entire nation’s output (a record high).
- Annual Government Revenue: Whoops! This figure is a lot less than what we spend. That generally spells trouble for individuals (or small nations like Greece). The gap between this and our expenses is called our annual deficit.
- Annual Deficit: Ouch! It’s the biggest it has ever been, and it’s a whopping 9.7% of our annual GDP. Expenses are 166% of our income.
- Federal Debt: Yikes! I hope this has a teaser rate and is interest only. It is 89% of our annual GDP and six times our annual revenue. That is $41,000 for every man, woman, and child in the U.S. Can you say overleveraged?
- Debt Held by Foreigners: Hmmmm… It is 23% of our GDP and more than our annual revenue. That can’t be good.
- Unfunded Liability for Social Security and Medicare: If you were a private company doing this, ERISA would put you in the slammer and throw away the key. It is $130,000 for every man, woman, and child in the U.S. We have promised retirement pensions and health-care insurance to everyone, taxed them for it, and have no way in the world to pay for it.
- $14.5 trillion estimate for 2010
- $3.5 trillion estimate for 2010
- $2.1 trillion estimate for 2010
- $1.4 trillion (you just need to be able to subtract to get this one right)
- $12.9 trillion current estimate
- $3.4 trillion current estimate
- $39.2 trillion ($5.1 trillion for Social Security and $34.1trillion for Medicare)
So, how did you do? If you couldn’t answer these questions, you might want to consider my initial premise that it’s hard to manage an activity if you don’t pay attention to the metrics. If you want a handy URL to keep track of the figures, the U.S. Debt Clock has most of them.
Mike Reineck, Principal