Mitt Romney Fails Finance 101

Mitt Romney talks about the U.S.A. government debt and (surprise!) gets it wrong.

Your Share Of The Debt

In Des Moines, Iowa, Mitt Romney said a bunch of stupid shit:

Let me put that in a way we can understand. Your household’s share of government debt and unfunded liabilities has reached more than $520,000 under this president.

The so-called “unfunded liabilities” don't belong in this calculation^[1], so let's take them out^[2], and pretend that Romney said “Your household's share of government debt is $125,000.”

That's utter bullshit. People (or households) are not the only taxpayers. Individual income tax is just 50% of collected federal tax; corporate and estate taxes combined are around 13%. If real corporate tax rates were at all sane, that number would be significantly larger. (“Real” means the rate actually paid, which seems to be in the single-digits, not the 35% marginal rate so often cited.) There are lots of ways to spin these numbers, but none of it changes the fact that there are entities in the U.S.A. other than “people” and “households”. They're called “corporations”, and they're trying really hard to be people^[3], with the full support of the Supreme Court they bought, and they pay tax. (Note that these stats do not include S-corporations.)

Here's another number: The top 1% (by wealth) households in the U.S.A. can pay off the entire U.S.A. federal government debt and have lots left over. (This is merely a theoretical exercise, as doing so would wreak economic and financial havoc on just about everything. But so would extracting $125k from every household.) The cutoff for the 1% is a household net worth of $8.4 million; if the top 1% were all right at that cutoff (i.e., none had more than $8.4M), they would have a combined net worth of $9.7 trillion, roughly two-thirds of the debt.

Sorry, Mr. Romney, but the debt, like income taxes, is not distributed uniformly across the population. Stop pretending it is. If you think it is, you're a fucking moron. If you think it should be, you're a fucking asshole. (But we knew that already.)

Comparing The Debt To A Mortgage

Then Romney said some even stupider shit:

The interest rate on that debt is bound to go up, like an adjustable mortgage. And there’s a good chance this debt could cause us to hit a Greece-like wall. Subprime mortgages came close to bringing the economy to its knees. This debt is America’s Nightmare Mortgage. It is adjustable, no-money down, and assigned to our children.

The U.S.A. government has already borrowed the entire debt at a fixed rate, mostly for 10 or 30 years (they're called "Treasury securities"). They are not adjustable, and they're at a fixed rate a whole fuckload better than any mortgage you can get.

Money down — WTF? “Money down” means you pay a little bit before you get something. Standard operating procedure, as far as I can tell, seems to be for government contractors to provide goods or services, and then bill the government (either at key milestones or on a calendar schedule). In other words, the government gets shit (services, work, or goods) before it pays anything. (There are exceptions, of course, but these are small.)

The debt is nothing like a mortgage. Don't pretend it is.

Summary

Mr. Romney, you either don't know shit about finance or economics, or you're a liar. (I suspect the latter.) I understand you need to appease the so-called “Tea Party” so that their corporate backers will still give you money, but this is just fucking stupid. You can't run a country using this kind of shitty false analogy.

Notes
1. ^“Debt” and “un(der)funded liabilities” are apples and oranges. The debt exists; the unfunded liabilities are future projections, subject to various assumptions which can be changed.
2. ^The U.S.A. federal government debt is something like $48k per person, or something like $125k per household.
3. ^Except for things like paying taxes, obeying laws, and all those other annoying things that real people have to do.