Will Federal Deficits Drag Water Utilities Down?


How serious is the federal deficit is sue, and how might it affect water utilities?  Great question, but I am cautious about any of the emails I receive.  For example, I received this email from one of the political parties.  The comment was “check out these statistics — they’re not only frightening, they’re downright unbelievable:

  • $16.5 trillion in debt
  • $5.9 trillion added to debt since 2009
  • $845 billion budget deficit in 2013”

Do we or don’t we have a spending problem. Well let’s see how serious we think this really is.  Banks usually figure you can spend up to 40% of your take home pay on your house expenses.  That includes electric and water, so let’s assume 1/3 of your take home pay.  If you earn $50,000 per year, your take home pay is in the $37,000 per year range.  That means you can spend $1000 per month your mortgage.  If the interest rate is 3%, you can qualify to buy a house loan of $235,000, or 4.7 times your total income, or 6.36 times your net income. 

So let’s see how serious the federal deficit is. The proposed federal government income for 2013 is 2.9 trillion, or 17.8% of the GDP.  Of course the Feds don’t pay taxes, so you can figure the 6.36 x net income yields So 4.7 times $2.9 Trillion is $18.4 Trillion.  The 3% percent is actually higher that the current rates the feds are paying (that’s our mortgage rate), so given that our current federal debt is $16.3 Trillion, so there is some room to spare and the feds could raise revenues, unlike you and I.  Paul Krugman is smiling because this supports his argument.

But is does speak to the need for one of two things:  either raise more revenues, or grow the economy to create more revenues.  The key is receipts will probably track with the economy, so as it improves, the deficits will reduce.  If the economy improves, that improves the outlook for construction, water sales, sewer sales, and local revenues.  That means maybe we can spend more on infrastructure locally.  Maybe we can look at adaptations to bigger issue like sea level rise or changing precipitation patterns to secure sustainable water supplies.  Most are regional issues, so help beyond the local level will be requir3d.  Washington?

Of course what would be great to get to a budget where we actually pay off some of that debt, something that has not occurred in the US since 1960.  If you are a local utility, local government, business or individual you need a debt repayment plan.  Perhaps next time we see potential surpluses, the solution will be debt repayment, not tax cuts……

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