Thursday, May 2, 2013

How to look at big numbers

So, when it comes to budgets, people often label them in the billions or trillions of dollars. This is accurate, but needs to be taken into comparison. People often cringe when they hear of the government spending money on a social project that makes our country better, whether it is transportation, education, or health care. While the total cost is right it needs to be taken into account how much money is being spent per capita. If the government of Los Angeles county is spending $50 million on a new project to expand their mass transit, people need to ask the question “how much will the average person's tax bill be raised?” instead of immediately jumping to the conclusion that it is too much money. If you took the people of Los Angeles investing $50 million in a new transportation network per year over 10 years you would be spending $12.50 per capita per year on the project. $12.50 seems like a reasonable cost for getting rid of congestion and other problems that plague Los Angeles. Looking at it this way makes it seem a lot more reasonable.

Another way to look at it would be how much per household is being spent on a project. If Los Angeles had an average of 3 people per household, than that would mean that $50 million project would have a per household cost of $37.50. Taking these two comparisons together can bring the millions, billions, and even trillions into numbers that people can understand, and make it seem more reasonable. Also, $50 million dollars is 1/1000 of Warren Buffett's wealth.

This would mean that the United States deficit (not debt) this year is $2,907 per capita. The government collected $9,361 per capita in taxes this year. Government spending then is $12,268 per capita, less than the cost of living by pretty much any measure. When the upper class invests their money in stocks and pay 20% taxes on those as opposed to the 39.6% they would pay if capital gains were treated as regular income, the solution to our deficit becomes obvious. For comparison, the government spends $2,150 on defense per capita. If we spent as much as China on defense we would spend around $322 per capita on defense. NASA gets $57 per capita. Social Security is $2,847 per capita. Long attacked AMTRAK funding is $4.70 per capita.

Another way would be to find the number of taxpayers (using income tax) and then find the average taxpayer burden, and the numbers will be larger, but more accurate depending on what you are looking for.

So, next time you hear the talking heads on (mostly) the right talk about how much the government spends, keep in mind how much they are spending per person and it won't seem so unbelievably large.

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