Posted by There are 10^11 stars in the galaxy. That used to be a huge number. But it’s only a hundred billion. It’s less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.
-Richard Feynman
Not so long ago I wrote a snarky post about economics wherein I joined the chorus of voices deriding the ludicrously horrible track record of predicting the impact of the stimulus. Well, another month another data point, overlaid on the otherwise unmodified Obama stimulus prediction:
Not only is it much worse than what the stimulus was supposed to accomplish, it’s much worse than what we were told would happen if nothing were done. So what’s to be done now? One suggestion is another stimulus. While I’m opposed to such a plan for both ideological and utilitarian reasons, reasonable people disagree. That’s fine. What’s not so fine is that a large segment of the public can’t make informed judgments about the issues simply by virtue of not having an intuitive grasp on the quantities involved. I’m going to throw my hat in the ring with the help of Microsoft Excel to try to show how these large numbers compare to each other.
While a true “powers of ten” presentation would start at the single-cent level, everyone has a fairly good grasp on what fifty cents or 8 dollars or 400 dollars can buy. As such, the power of ten we’ll look at first is the fourth – ie, the $10,000 range. We also won’t be skipping in powers of ten as such, since I’m picking the cutoffs for each graph to hold the most “related” items in similar monetary ranges. This naturally means that my choice of cutoffs can tend to itself make a biased point – something you should always be on the lookout for, since it’s easy to lie with statistics
Straightforward average-person-sized values. What a person at the poverty line makes, what I make, what the family right in the middle makes, what a person at the low end of “upper class” makes. In a nutshell it’s the gap between rich-ish and poor-ish.
Zooming out, a house whose cost is right in the middle, the salary of the president of my university, the salary of LSU coach Les Miles. Don’t construe this as an attack on Les, by the way. He makes a huge amount of money, but in total his very successful LSU Tigers are a large net source of revenue to the university – a distinction not all that many university football programs can claim.
Les Miles makes a lot, but not quite as much as it costs to build a tank. Which is itself not nearly as much as 16-year-old Miley Cyrus makes. Not that I begrudge her that salary either – can you generate Hannah Montana’s kind of revenue for your company? I sure can’t. We’re leaving the realm of purely single-person money and starting to approach the money of large organizations. The city in which I live has a municipal budget in the low hundreds of millions.
The city’s budget is half that of the college it contains, but both start to look small next to the wealth of a truly rich person like the wife of the richest senator. Though John Kerry is thought to be the richest senator, his wealth is smaller and separate from his wife. Keep in mind that the budgetary figures are annual, and so don’t think it would be easy for even Teresa Kerry to support a university – it would burn through her assets in just a few years. A Nimitz-class aircraft carrier is much more expensive. Ten have been built. NASA’s space operations budget is not the total NASA budget, just that which funds the Shuttle and ISS programs.
Wal-Mart’s profits are enough to fund NASA and then some. Wal-Mart’s actual revenues are some thirty times higher than even that, but as with most businesses the vast bulk of what’s coming into the registers promptly leaves in the form of purchasing products to sell, building and maintaining stores, worker salaries, dividends, tax, etc. Bill Gates is worth considerably more. Though his position as Richest There Is comes and goes, his bar on the graph is a pretty good proxy for the most money any single person can muster. State-level expenses can easily be much greater than that every year for single budget categories. Some people who have not grasped large numbers intuitively wonder why Bill Gates can’t use his money to fix X. Odds are that the answer is that X is one of those things that dwarfs even his considerable resources. The Iraq War is often used as another proxy of “Money That Could Do X”, and the total 2008 appropriation for the two wars is graphed here for a sense of its magnitude. It’s a lot, but we’ll see that we have a few more orders of magnitude to go. The 2009 appropriation is quite a bit smaller, as Barack Obama is attempting to wind the war to a safe conclusion.
The ’08 Iraq/Afghanistan cost is small compared to baseline defense spending and most of the major yearly federal budget expenses. In fact the sum total of the entire Iraq war to date is smaller than any of next year’s Social Security, next year’s Medicaid & Medicare, or last year’s stimulus bill. If I may slide into overt editorializing, that’s one reason I’m very skeptical of another stimulus. They cost an unbelievable amount of money.
Now we’re into the trillions with a T. The stimulus bill – which as we said was enormously large – is itself looking pretty small next to the federal deficit. The deficit is of course what the government spends minus what it takes in (mostly via taxes). Both of those are also on the chart for comparison. I’ve also included the sum total of the income of every person who makes $200,000 or more, minus what they already pay in federal taxes. Since taxes on the rich and defense cuts are often suggested as a way to reduce the deficit, it’s instructive to look at exactly how large the deficit is compared to defense spending (on the previous chart) and the total income the rich actually have as a group. The rich have a lot of money, but it is finite and fits on this chart.
The last chart, now reaching figures in the tens of trillions. Total government spending is federal spending plus state and local spending. I’ve had to use the 2007 figures for state and local spending, but given the rise in 2008 and a slight fall it 2009 the number should still be reasonably close. While the US is nominally a free-market capitalist economy, in fact government spending makes up a rather large fraction of the total economic output of the United States. Every year, the deficit piles into the debt. Currently the indebtedness of the United States government is nearly the size of a year’s worth of the US economy. Increasing debt itself drives up federal expenses, as its creditors must be repaid with interest. The deficit is projected to decrease in 2010 and for a few years thereafter (though never even so far as the then-record deficit set by Bush in 2008) before ramping up again.
I don’t pretend my analysis or presentation is entirely objective, but the numbers themselves are correct to the best of my ability. For better or for worse, we have to live with them.
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