Monday, May 25, 2020

"How Much is One Trillion Dollars?"

Sydney M. Williams

Thought of the Day
“How Much is One Trillion Dollars?”
May 25, 2020

It is a popular delusion that the government wastes vast amounts of money through inefficiency
 and sloth. Enormous efforts and elaborate planning are required to waste this much money.”
                                                                                                            P.J. O’Rourke (1947-)
                                                                                                            Parliament of Whores, 1991

Congress is tossing around trillion-dollar relief packages, as we might a car or student loan, or a loan from Aunt Sally. A trillion is a big number, difficult even to conceive. Five thousand round trips to the sun would amount to less than a trillion miles. A trillion hours is greater than 100 million years, which would take one back to the Cretaceous Period when dinosaurs roamed the earth. A stack of a trillion one-dollar bills would reach 67,866 miles into the sky. The earth contains seven and a half billion people, a big number but less than one percent of a trillion

Here in the land of make-believe, the Democrat-led House of Representatives just passed the $3 trillion HEROES Act. A month earlier, Congress passed, and the President signed, the $2 trillion CARES Act. Combined, that Five trillion exceeds the 2020 federal budget. It exceeds, in current dollars, what we spent to conduct World War II. “Desperate times call for desperate measures,” is an ancient adage. However, do American taxpayers fully comprehend the size of the obligation to which Congress has committed them, their children and grandchildren? Senator Everett Dirksen (1896-1969 – R-Il) is alleged to have said: “A billion here, a billion there and pretty soon you’re talking real money.” Here it is, two generations later, and we’ve upped the ante a thousand-fold. In a time of crisis, Americans should not be parsimonious, but we expect our representatives to be prudent and respectful about spending money that is not theirs. To use this money to bail out profligate states and extend already generous benefits to public employees should not be the purpose. America needs to get back to work.

Government generates no income. That is hard to believe, given the lifestyles and the prodigality with which politicians toss money around. Government takes from taxpayers, and it borrows on behalf of those same taxpayers who are legally committed to pay it back. With a median annual household income in the U.S. of $63,000, and assuming a four-person household, the proposed borrowing for COVID-19 and its economic fallout amounts to just under a year’s income for the average household. And, that $5 trillion is on top of total federal debt of $22 trillion, growing at a rate of $1 trillion a year. Unfunded pension and health benefits compound the debt problem for the American taxpayer. Depending on the discount rate one uses, unfunded liabilities approach $50 trillion. Where will the money come from? There are only three answers: one, growth in GDP, which requires free markets, rule of law and limited but sensible regulation; two, higher taxes, which inhibit economic growth, and/or three, a depreciated dollar, which will reduce future living standards.

This is not to suggest the economy does not need a boost. It does. Individuals who have lost jobs and businesses threatened with bankruptcy, especially the thirty million small businesses who have less access to public funds, need cash infusions. In fact, the economy could use a domestic version of the Marshall Plan. But Congress and the Administration must also address run-away entitlements and the inflated incomes and benefits of public sector workers. Government can only raise revenues from individuals and private sector businesses. There is a limit to what they can take, without stalling the economic engine.

Hard truths about our financial situation are not part of the lexicon of politicians, especially during elections. The offer of “free stuff” is their preferred message. “Eat, drink and be merry, for tomorrow we die” is an appropriate aphorism for today’s Washington-bound politician. As a percent of GDP, Federal debt has doubled since 2000 to over 100% today, about where it was at the end of World War II. The growth in federal spending, and the concomitant debt and deficits, are fueled by entitlements, which are mandatory items in the federal budget, while, ironically, defense spending – necessary to maintain our freedom – is treated as discretionary. When one throws in interest expense (abnormally low now, but that will not always be the case), mandatory spending exceeds seventy percent of the federal budget. It is understandable why infrastructure is crumbling, and our high schools are, globally, less competitive.  Most important, on this Memorial Day weekend when we remember and honor those who died so we could live in freedom, the growth in mandatory spending constrains what can be spent on defense. Without a strong military, our nation will crumble, and our liberties will be lost.

But back to the number of a trillion. How much is $1 trillion? A lot. Perhaps to microbiologists and astronomers, with an estimated 37.2 trillion cells in the average human body and with an estimated sextillion stars in the universe, a trillion is no big deal. Even for some naturalists, a trillion doesn’t generate awe.  E.O. Wilson, the Harvard myrmecologist and author of The Social Conquest of Earth, estimates that there are 10 quadrillion ants on the planet. But I would rather Congress not hear these numbers, as they may look upon them as aspirational when prudence is preferred.

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