Secret to Understanding our BIG Budget Problems: Think Small
by KEN BRAUN
As much as the human brain must have developed since caveman times, it still tends to need small, simple numbers to understand much of the information we take in every day. Back then, it was likely, “How many buffalo must I kill this week to feed my tribe?” The answer was not “one million beasts” … nor was it “less than 100 percent of one buffalo.” The math of the caveman didn’t often require more than adding and subtracting the fingers on each hand.
As we are not that biologically far removed from these ancestors, it’s easy to see why a whole number with twelve zeros attached to it loses virtually all meaning. If you were told that the federal budget had swollen up to $3.8 MILLION trillion, rather than a mere $3.8 trillion, would $1 billion removed from that seem a million times smaller … or just as head-scratching irrelevant and confounding?
The federal debt is an even more daunting $16.5 trillion. If you want your head to really hurt, then look at them this way: $3,800,000,000,000 and $16,500,000,000,000.
Eyes glazed over yet?
There is a solution. But first, recognize that you’re not alone: A lot of the big media is right there with you, and just as confused. We’re in this big budget mess because nobody – NOBODY – speaks the language of BIG numbers. Once we get beyond the value of our home or size of our 401k – or MAYBE the annual salary of a star athlete – the zeroes all run together and we start worrying about problems we CAN understand.
Dan Mitchell, budget director of the Cato Institute, showed a near perfect example of the problem involving the Washington Post – the hometown newspaper of the federal government. Last year, in a story about cutting the federal budget, the WaPo said the following:
“The bill will cut $6 billion in federal spending. That makes twice this month that lawmakers from both parties have agreed to slash billions from the budget.”
Taking away $6 billion sure seems like a “slash” to brains not used to big numbers. And our simple whole number noggins do only slightly better knowing that $6 billion taken from $3.8 trillion is a mere reduction of 0.16 percent.
But that slash is really not even a pin-prick. Instead, what if that reporter had whacked off nine of those scary zeroes?
Try it yourself: $3.8 trillion becomes a mere $3,800 – the monthly salary of many middle class Americans.
That $6 billion the Washington Post says was “slashed” from the budget last year?
That’s just $6 out of your $3,800. Or one trip through the McDonald’s drive thru.
The President says the $85 billion budget sequester hitting this year’s spending on March 1 is going to be “harsh.” In reality, think of it as $85 – less than two trips to the gas station out of your $3,800. Or maybe even less than your cell phone or cable tv bill.
Happily, Mr. Mitchell also says simple numbers will get us to balance the federal budget. According to his calculations, the government can continue to grow larger by 3.4 percent per year for the next decade and we would still have a balanced budget by the end of ten years.
How much is 3.4 percent annual growth of government?
The entire U.S. economy hasn’t growth that fast since 2004. Our economy even SHRANK by 3.5 percent as recently as 2009. So the bottom line for our federal bottom line is that we can let government spending grow much faster than the largest economy in human history for a decade and STILL show positive cash flow by the time it’s all done.
His numbers would allow $1.5 trillion to be added to the size of the federal budget over ten years. Instead, we’re on a path to add about $2.5 trillion.
That’s $2,500 on top of your $3,800: Quite a big raise.
It’s important to understand the little numbers. They can add up to big problems … or big solutions.
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