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How much is a trillion?
In case you had forgotten, via James Hamilton:
A trillion dollars used to be a sum that never naturally came up in normal conversation. Now all of a sudden, it's the standard unit we seem to be using to talk about our economic problems and what we're trying to do about them. Fortunately, I think I finally got a handle on what $1 trillion really means.
A trillion dollars is about the total amount collected in income taxes by the U.S. federal government in fiscal year 2006-- $1.04 trillion, if you're curious to use the exact number. That gives me a simple rule of thumb for personalizing these numbers. If I want to know what an additional trillion dollars in government borrowing or spending will mean for me, I just imagine what it would be like to pay twice as much in federal income taxes for one year.
So, for example, with the President's proposed budget calling for deficits of $1.75 trillion for 2009 and an additional $1.17 trillion for 2010, after 3 years of paying twice as much as I paid in 2006, I'd have about paid off my share of the bill for the first two years of the proposal.
Read the whole thing.
Posted by Tyler Cowen on March 4, 2009 at 07:23 AM in Education | Permalink
Comments
Wow.
3 years of paying 2 x what I paid last year in federal income taxes is way too much for this citizen.
Posted by: at Mar 4, 2009 8:03:24 AM
When asked by a 6-year-old recently, I told him it was "a million millions." I then went back to Hendrik Hertzberg's "One Million" which simply presents 5000 dots on 200 pages--one million dots to hold in your hand--to illustrate. He won't forget that; I almost wish I could.
Posted by: T at Mar 4, 2009 8:09:29 AM
The deficit is going to blow by that $1.75T number like it was standing still. There's not enough investment money in the world to lend the Obama Administration what it needs for it's Porkgasms.
Posted by: K T Cat at Mar 4, 2009 8:49:36 AM
As a Canadian, I simply think, "roughly, the value of all the goods and services consumed by my entire country in a year".
Posted by: Josh at Mar 4, 2009 8:53:22 AM
Holy cow! He has a point! No way am I voting for Obama in 2012 after 3 years of a 100% tax increase!
Light the torches! Fetch the pitchforks! Huzzah!
Posted by: MostlyAPragmatist at Mar 4, 2009 8:56:07 AM
I read recently that it is a stack of $100 bills almost 130 times as high as Everest.
Posted by: josh at Mar 4, 2009 9:00:14 AM
Indeed a lot of money. For those interested in understanding how those huge amounts have been reached, I recommend to read the first three papers by Ed Kane in his biography:
http://www2.bc.edu/~kaneeb/
You can read a summary in http://www.voxeu.org/index.php?q=node/317
Posted by: E. Barandiaran at Mar 4, 2009 9:00:27 AM
Is it even possible to collect twice as much income tax as the US gov did in 2006?
Posted by: josh at Mar 4, 2009 9:02:01 AM
I'm surprised to see a link to this. It's not a very meaningful description. it's not even that much if you think it will prevent another long depression.
Posted by: mpowell at Mar 4, 2009 9:02:39 AM
That's both a whole lot of money and a whole lot of malarkey. When you bought your first house did you pay cash or, like most of us, mortgage it over a number of years? Second, what are the odds of that $1T being paid back in 2009 dollars? Get ready for several years of solid inflation. How many years of 5%-10%% inflation do you need before that $1T is noise in the system?
Posted by: David Rotor at Mar 4, 2009 9:11:34 AM
after 3 years of paying twice as much as I paid in 2006, I'd have about paid off my share of the bill for the first two years of the proposal.
Great: Then after three years of paying for the first two years, you're only a year behind on paying for the first three years. The shade of Tennessee Ernie Ford must be having a good laugh over this.
Posted by: The Sheep Nazi at Mar 4, 2009 10:09:01 AM
Typically pointless Republican hackwork on this analysis, especially considering the bulk of the deficit will be financed by bond issuance not tax increases. But why not stir the pot and get the wingnuts going huh? Also, the bulk of the treasury issuance will be debt the government owes to it's own citizens (we currently buy about 60% of treasury issuances) and will set the stage for a boom like the post-WWII boom.
Fiinally, to analyze the stimulus like it's a trillion dollars is typically wingnutty. I don't know about you, but $223 BILLION is a lot of money. That's the difference between $1 Trillion $778 Billion (the actual number).
Posted by: Sprizouse at Mar 4, 2009 10:21:46 AM
How about this: if one dollar is one second, then a million dollars is 12 days, a billion dollars is 30 years, and a trillion dollars is 30,000 years.
Posted by: Gary at Mar 4, 2009 10:28:01 AM
Since a lot of the initial deficit here results from simply having put the wars on the books rather than hiding them in supplemental spending, it's pretty clear this is more disingenuous hackery by disgruntled Republican-leaning economists.
Posted by: M1EK at Mar 4, 2009 10:40:54 AM
Typically pointless Republican hackwork on this analysis, especially considering the bulk of the deficit will be financed by bond issuance not tax increases.
Which will be paid off with future tax revenue. Or perhaps you favor 3 trillion dollars in spending cuts?
Posted by: Zach at Mar 4, 2009 10:51:37 AM
Talking about piling money until it reaches the moon or whatever is kind of unneccesary. A billion dollars is $3,300 for every man, woman, and child in the United States. Which is a significant of money, but it's nothing crazy.
Posted by: anon at Mar 4, 2009 11:05:43 AM
I think my potential future tax increase is looking small to my just-recent real estate and portfolio losses.
I know that's a little apples and oranges, but then again it's not. In a major recession everybody loses, one way or another. Everybody has to take their lumps.
The correct question is still how do we grow out of it, and recoup our various losses? Can anyone answer without falling to a party line?
Posted by: odograph at Mar 4, 2009 11:09:08 AM
The money creation process is not understood. The only way net money is created is by government deficit spending.
We do not have to pay this deficit spending back. We just have to worry if that it is too high relative to the tax burden, our currency will be debased.
Posted by: Mike S at Mar 4, 2009 11:12:38 AM
odograph: The answer to your last question is,by all the evidence we see around us, a resounding "No!".
Posted by: songar at Mar 4, 2009 11:29:55 AM
The bottom 34% or so pay $0 in federal income taxes. 2 * $0 = $0!
Posted by: Jay at Mar 4, 2009 11:32:40 AM
Typically pointless Republican hackwork on this analysis, especially considering the bulk of the deficit will be financed by bond issuance not tax increases.
==
I thought bonds were not net wealth?.
Posted by: jason voorhees at Mar 4, 2009 11:38:27 AM
"$3,300 for every man, woman, and child in the United States...it's nothing crazy."
Saddest statement I've read all week.
Posted by: josh at Mar 4, 2009 11:41:28 AM
"Talking about piling money until it reaches the moon or whatever is kind of unneccesary. A billion dollars is $3,300 for every man, woman, and child in the United States. Which is a significant of money, but it's nothing crazy."
Have you tried asking a 3 year old for $3,300 dollars? Good luck with that.
Think of it in terms of households. 1 trillion dollars is approximately $8,800 per household.
The main issue with this deficit is that it is not evenly distributed across the population. If it was all spent on roads, bridges, the power grid, then we would all at least have nicer roads, safer bridges and cheaper electricity. But it is not. Some of the deficit will finance infrastructure investment but most of it will take the form of transfers to particular groups, the unemployed, the uninsured, the broke, the investment banker. Yes those groups are suffering, some because of bad luck some because they screwed up, in any case we will now all have to pay for their daily expenses.
Posted by: Joen at Mar 4, 2009 11:41:58 AM
Brainwashed republicans fell under the same spell that many democrats are falling under here.
No matter how much evidence came out that Bushes GWOT was a bad idea for the average american....the republicans supported it. The opposition said "this immoral aggression is INCREASING support for the radical islamist"...the republicans said "oh shut up you left wing wacko, we hate the clintons and their ridiculous health care communism plans"
now opposition to obama makes legitimate criticisms of policies that may be destroying our financial future and the democrats frame it like this "shut up you right wing wackos, we hate dittoheads"
Obama and Bush are carrying out largely the same policies, Obama has only continued the large increases in govenment spending. When is the patriot act being rescinded? why no protest about new enlarged war in Afghan?
The empirical evidence is clear, increased government spending during hte Hoover and FDR years did not make our economy better.
JFK's tax cuts helped tremendously.
Posted by: Gabe at Mar 4, 2009 12:13:08 PM
Think of it in terms of households. 1 trillion dollars is approximately $8,800 per household.
Think of it in terms of houses. The average house has declined $20K year-over-year.
In terms of our irrational human response to social issues ... how much of this is a need to look at the smaller number because it is more of a political flashpoint? Here's another one: Retirement assets plunge more than $2T
Is this focus on $800B of stimulus rational, or in a way escapism?
Posted by: odograph at Mar 4, 2009 12:24:00 PM
