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Federal Government Wed Feb 11 2009
Some folks, like the bankers the Trib's Greg Burns quoted today, are saying that a trillion is so big no one can grasp what the bailout and stimulus numbers really mean. A trillion is a big number, but it's not impossible to understand. It's a thousand billions, or a million millions. You know what a million is, right? It's more than you probably make, and more than you probably have.
But this daunting figure is so large only because the U.S. is a big country of over 300 million people. Anything we do on a national scale is now, by definition, a big number. Break it down by population, and a trillion is easier to understand. And since this is money that ultimately comes mainly from you and me, let's break it down by taxpayer.
Approximately 140 million individual income tax-return-filing households provide about three-fourths of the general revenue of the federal government, with corporate income tax also providing about one-fourth (I'll ignore here excise and estate taxes, less than 5 percent total). If you take three-fourths of a trillion and divide it by those 140 million households, it's a little over $5,400 each. Even assuming the number of individual taxpayers will grow -- no sure thing -- it's safe to say that each time the government tosses a trillion around, you, Mr. or Mrs. Average Taxpayer, are getting saddled with another $5,000 in debt, and since about one of five households pays no income tax, it's really more like $6,000 if you are one of those tax filers who actually pays taxes during the year. And that $6,000 will have interest added until it's repaid.
There were roughly 2.5 million corporate tax returns in the country as of 2007, about one corporation for every 50 taxpaying households, and a massive sampling in 2007 showed that two-thirds of corporations pay no income tax.
So, ballpark, about 830,000 companies pay about one-fourth of federal tax revenues. Assuming they'll pay for these trillions at about the same ratio, those taxpaying corporations are getting socked with around $300,000 each, every time another trillion is spent.
The various financial bailouts are already estimated to have cost over $4.3 trillion -- in constant dollars, more than the combined cost of WWII, the Vietnam War, and putting a man on the moon.
When the $800B stimulus plan and the next financial trillion (yes, there's another one coming, whether it's the "bad bank" or some other contraption) are added in, the federal government, in less than six months, will have saddled every individual American taxpayer household with about $30,000 in debt. You can think of that as a new car, or compare it to the median 2007 adjusted gross income of $32,000.
Meanwhile, every taxpaying corporation can look forward to paying about $1.8 million for the bailouts and stimulus to date. Think that might affect business?
All this is on top of what we all collectively owe, through governments, on pre-existing federal, state, and local debt. Some of that is, of course, owed to ourselves, since we buy savings bonds and T-bills and keep our money in funds and money markets that buy treasury securities and state and municipal bonds. But it's added a lot in a hurry. And, fundamentally, we're trying to pay for problems created by borrowing -- with more borrowing.
So don't be "boggled" by numbers that at first glance your eyes glaze over. If you are an average taxpayer, every time some talking head says another trillion is being spent, just bring it down to street level, and say, "that's another six grand from my future earnings."
You'll sound like an expert in no time.