Government’s huge credit card

In response to the March 16 letter by Mike Bakula: He obviously doesn’t know the difference between an income statement and a balance sheet.

I’ll use a household budget as an example. If you own a home, its value is an asset. The amount you owe on the mortgage is a liability. The difference between the two is your net worth. Obviously there are many other assets and liabilities a person can have (savings, automobiles, loans, etc.). However, the monthly payment for that house would be included on your income statement not on a balance sheet.

If, for example, you took home $4,000 per month and your expenses totaled $5,000 per month you would be operating at a deficit. Yes, you could sell your home to pay off the debt, but you’d still have to live somewhere and have a rent expense. Worse yet, say that $5,000 in expense is all interest and you are not paying off any of the debt.

Now multiply that by a few trillion. That’s what our government is doing. They’re living off of a huge credit card. They’re not accumulating assets. They’re using the loans to pay for the normal operations (government programs).

This story was originally published March 19, 2016 at 7:07 AM with the headline "Government’s huge credit card."