Putting it in Perspective

A billion here, a billion there, and pretty soon you’re talking real money

–Senator Everett Dirksen

On Terence Tao’s blog a few weeks ago he had a very interesting post about the federal budget of all things.  If you watch the news you might remember that the President announced that he had asked the cabinet to cut $100,000,000 from their budgets.  On the one hand, 100 million dollars sounds like a heck of a lot of money.  But as Greg Mankiw, a Harvard professor of economics, pointed out, if you rescale that to make it comparable to a more real world amount of money, then the cut was comparable to a family with an annual spending of $100,000 and a deficit of $34,000 deciding on a spending cut of $3.

Not very impressive.

Dr. Tao explains how to make that rescaling and also applies the same rescaling to a bunch of different items related to the federal budget.  It’s pretty eye opening.  For example, the math and science research budget of the National Science Foundation (the government agency which funds virtually all research in math) is $37.50, and the 2008 budget for the wars in Irag and Afghanistan was $5760 (above and beyond the budget for the Department of Defense).

It puts everything in perspective.

Click here for the US Debt Clock

Click here for the US Debt Clock

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2 thoughts on “Putting it in Perspective

  1. Really cool calculator there, and quite a bit of legwork put in by Dr. Tao in finding all official numbers numbers.

    Sometimes I wonder about what might happen if our debt was called in, or if it ever got “too large” and just how large is “too large.” Can the debt even get too large? If America hits bankruptcy, leading to economic ruin, the rest of the world is pretty much dead in the water as well.

    I understand the debt-to-GDP ratio is not as high as some countries (Iceland, for example), but something about seeing numbers in the trillions is just worrisome, to say the least.

  2. Alex,

    Agreed! The amount of money is staggering.

    Looking online, the best guess from the The White House is the estimate that the budget deficit will exceed $1.8 trillion this year and “shrink” to about $900 billion by 2011. Remember, the deficit for a year is the amount of *new* loans taken out by the government. Of course, in July of 2008 the White House estimated that the 2009 deficit would “only” be $482 billion! And that would itself have been a record!

    However, some very knowledgeable people aren’t too worried. If you look at Robert Reich’s blog on June 10, 2009 he explains why he doesn’t think it’s a huge problem (you’ll have to google it as no linking is allowed in comments). He was secretary of labor for Bill Clinton and is now a professor at UC Berkeley.

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