Who is the Average American, and Where Does Their Money Go?

In the politically charged climate of today, I hear a lot of people speaking for the average American. Everyone would like to believe that they represent the right side of each argument. Whether the subject is health care, crime and punishment, the national debt, or our military actions in foreign countries; pundits on both sides of the aisle claim that their position is better than the other when it comes to the best interest of the “average” citizen.

One of the biggest arguments I hear, whether it is from the likes of Glenn Beck, Rush Limbaugh, Sean Hannity, or any of my Fox News loving friends, is that they do not want any increase in government spending, because they already pay too much in taxes.

My friends, and even some family, believe all of the outrageous talking points uttered every day on Fox News. It is impossible to have an intellectual discussion on any of the real issues of today, because when confronted with facts, they immediately spout out ” I am sick and tired of supporting all those lazy people sitting at home all day and getting welfare.”

They truly believe that they are personally supporting at least 2-3 families that sit at home all day watching flat screen TVs, getting free health care, and getting free food.

They point to the fact they pay their own health care premiums, mortgages, and credit cards, as if those are badges of honor.

Don’t get me wrong, I applaud their fiscal responsibility, it is a testament to a good work ethic, and a responsible character. However, I don’t understand how they can feel so good about giving all of their money away to these large companies, which are all making record profits, while holding such contempt for those in need.

While I could go on and on about the myths and facts of welfare in America, I will instead offer up the research done by Alabama Possible, a non-profit organization working to help eliminate poverty in America. This is a “MUST READ” for anyone that thinks they know who is on welfare in America. Download the study as a pdf here. Myths and Facts about Poverty and Welfare

Instead, let’s get back to the real “Average American”, and look at what really happens to his money. From there, I think the finger should shift its focus to targets more deserving of our anger.

First off, let me say that I am using the latest statistics available. I am also suspending the laws of economics. I am not adjusting for inflation, increases in insurance premiums, or any other adjustments. I am freezing the economy as of today, and running with the numbers as they currently stand. This actually hurts the core of my argument, as health care premiums are rising far faster than wages, but the numbers are already absurd, so it matters little to me.

The Median Household income is $50,233 *1. If you make this much money, you will either be in the 25% tax bracket, if you are single, or the 15% tax bracket if you are married *2. For the purpose of this analysis, I will use a 20% tax rate.

The median price of a home is $215, 600 *3, and the average interest rate on the mortgage is 5.03% *4.

The average amount of household credit card debt is $8,329 *5, with the average interest rate of 16.7%*6.

So let’s look at where our “Average American’s” money will go each year, and then look at how much money he spends after working for 45 years (ages 20-65).

The average health insurance premium for a family in the US is currently $13,375/yr *7.

Each year, he/she will spend $10,046.60 on taxes. Those taxes are spent to run the government. Here is a breakdown of the budget *8:

Defense – 21% or $2,109.79
SSA – 21% or $2,109.79
Medicare and Medicaid – 20% or $2,009.32
Safety Net Programs (This includes Welfare) – 11% or $1,105.13

• Includes Temporary Assistance for Needy Families
• Food Stamps 
• The Earned Income Tax Credit
• Unemployment compensation

Interest on National Debt – 8% or $803.73
Benefits for Federal Retirees and Veterans – 6% or $602.80
Scientific and Medical research – 3% or $301.40
Transportation Infrastructure – 3% or $301.40
Education – 2% or $200.93
Misc – 5% or $502.33

Each year, he/she will spend $1,390.94 on interest to their credit card companies.

By buying their average home, at the average mortgage interest rate, they will pay $418,082.40 over thirty years. This means that they are paying $202,482.40 in interest, which amounts to an average of $6,749.41/yr.

So after working for 45 years, the “Average American” has earned $2,260,485, and spent (broken down by category and % of lifetime income):

Mortgage interest – $202,482 or 8.96%
Credit Card interest – $62,592.30 or 2.77%
Health Insurance Premium – $601,875 or 26.62%
Safety Net Programs – $49,731 or 2.2%

So, who are you mad at now? Unless you are one of the banking executives earning a $1M bonus, or a mortgage company exec that got a “golden parachute” on your way out, or a health care company executive making obscene money off of the record profits of their companies, I don’t know how you can point the finger of blame on the less fortunate citizens in our country. Most of my friends who routinely run with this argument are staunch Christians. Doesn’t God demand 10% to do his work? How many of you actually pay that full 10%.

Let the comments and rebuttals fly. I stand by my research, and challenge you to refute my facts.
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http://en.wikipedia.org/wiki/Household_income_in_the_United_States

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2010_income_brackets_and_tax_rates

http://www.census.gov/const/uspriceann.pdf

http://www.bankrate.com/

http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php

http://www.indexcreditcards.com/credit-card-rates-monitor/

http://www.usatoday.com/money/industries/health/2009-09-15-insurance-costs_N.htm

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258

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