This math isn’t fuzzy

News that the national debt has now topped $13 trillion boggles the mind – and the calculator. I recently posted about the idea that numbers this massive can sometimes feel a little bit like “Monopoly Money” and be difficult to grasp. So, that begs the question; how much is $13 trillion?

If you earned $1, every second, every hour of every day, it would take you 412,227 years to earn $13 trillion. And if you had $13 trillion, you could:

  • Purchase a $219,000 single-family home for 59,320,730 million American families.
  • Purchase 1 year of public college education (median cost) for 1.85 billion students OR pay for 462 million-plus 4-year degrees, assuming costs stay level.
  • Purchase 1 year of private college education (median cost) for  494 million students OR pay for 123 million-plus 4-year degrees, assuming costs stay level.

Americans are often criticized for being too consumerist – for spending too much and saving too little. It would help to compare them to the federal government on matters of spending and debt.

First off, the figure looks like this: $13,000,000,000,000.00. That is a long number, with lots of zeroes, but those aren’t good zeroes. Here’s why.

The “personal savings rate” for Americans is very low, anywhere from 3-6 percent in 2009, as similarly reported by the government. Keep in mind that savings rates among Americans were as low as -1.6 percent in 2006, meaning we spent more than we made on an annual basis through credit. The federal government’s savings rate is sub-zero. Even the money set aside for covering future entitlement obligations such as Social Security payments has been spent, with Congress over the years placing IOU’s in the accounts.

Total U.S. consumer debt as of March of this year – that’s credit cards, car loans and other consumer debt except mortgages – was $2.45 trillion, according to the Federal Reserve. The national debt is more than five times larger than that. According to CreditCards.com, the average American household with credit card debt owes $15,788 on their credit card balances. That’s too high for many Americans, but it is small when compared to the average American’s share of the national debt.

If we divide $13 trillion by the population of the United States, now greater than 309.3 million people, we come up with $42,022. That equals the share of the debt burden that Congress has placed on every American citizen. At $42,022 per person, the $13 trillion national debt is now larger than Americans’ per capita income in the last year: $39,138.

If the government took every dollar that every person in America will earn this year and used it to pay off the national debt, that would still leave in excess of $800 billion in debt. Obviously, mandating that all Americans go on a year-long fast is absurd. But consider the notion that even if every penny of our Income in 2010 were set aside for paying down the debt, there would an $800 billion shortfall. In terms we hear often related to mortgages in America, we are essentially “upside-down” on our future.

Come back Wednesday for what we’ll need to do to fix the situation.

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6 Responses to “This math isn’t fuzzy”

  1. After Bilingual Books, Bilingual AudioBooks | New Ebook Reader.net Says:

    […] This math isn’t fuzzy « Signers & Framers […]

  2. The Destructionist Says:

    THE EVOLUTION OF CAPITALISM

    Capitalism was founded upon basic principles: production, supply and demand, and capital accumulation. It is a social theory whereby prices are determined by profit and loss, as well as market interest and fluctuations.

    Although I understand the need for a free market enterprise, such a theory should not imply that we are willing to disregard our environment, or sacrifice the needs and comforts of our humanity in an attempt to realize higher profits (a.k.a., BP, Lehman Brothers, Goldman Sachs, etc).

    Capitalism may be wonderful, but like anything else, it is still a flawed system. It’s a work in progress. It needs to be tweaked here and there in order to perfect its balance and to soothe the inordinate swings that occur day-to-day in our financial markets. If left unchecked, however, such a system will prove to be our economic downfall.

    How so?

    Well, for one thing, there is only so much profit a business can make from a product before it is left to cut costs in both quality and workmanship. In order to continually sustain a profit, businesses have to create those same products with lower quality ingredients and cheaper labor: which means that they must pull up stakes and move to other countries like China, Taiwan, or Mexico in order to survive. What does this eventually mean for people like you and me? It means that the very financial theory that promoted our country to super power status has turned on us. It means that the American workforce is now expected to work harder, longer, cheaper, and faster if we are to compete with the global economy now breathing down our necks.

    Where do we go from here?

    George Orwell had it right, to some extent, when he wrote his book1984. Many years from now, money will become worthless and the global populace will be employed and subject to hundreds (if not thousands) of individualized corporations that managed to survive attrition through merger aquisitions. It will be a feudalistic society: every corporation out for blood and vying for global dominance and absolute power. Our children and grandchildren will be there too: housed, clothed and fed by these various corporate entities; all the while being sent out on occasion, like brainless automatons, to errands of war, in an effort to absorb the weakest corporations into the fold. After all the dust settles, and everything is said and done, the remaining corporations will finally merge into a one-world government.

    Science fiction, you say?

    (…I’m left wondering.)

  3. Austin_from_Vandy Says:

    Hey “Destructionist”

    I’m not exactly where I should I start in reply to your comment. I think the best way to respond would be to go line by line.

    I agree with your first paragraph, but I do not think it goes far enough. Capitalism is an economic theory, but it naturally arises out of a political system that ardently defends individual liberty, especially the right to private property. Milton Friedman correctly points out that, “wherever you have freedom you have capitalism.” You cannot abolish capitalism without abolishing a system of individual liberty.

    Your second paragraph greatly confuses me. What does capitalism have to do with disregarding the environment or sacrificing our humanity? And how do those relate to the companies that you list? I assume that you list British Petroleum because of the oil leak which would also relate to your environment comment, but capitalism is not anti-environment or humanity. BP made a serious error that has caused significant harm. If injury occurs in a capitalist system, then the disputing parties go to court for the matter to be settled. If a judge decides that BP has done injury, then he/she can force BP to pay damages to the victim(s). In this case, capitalism does not protect BP, it puts it in very deep water…pun intended.

    Your third paragraph also leaves many questions unanswered. You say capitalism needs to be “tweaked” but what exactly does that mean? I assume you mean more regulations and oversight etc. Besides the fact that the power to intervene in the market place is not granted to the government in the constitution, the more the government does get involved, the worse things get.* Why? Because you cannot restrict capitalism without restricting freedom.

    You say that capitalism is flawed. How so? Because companies fail and people go broke? The system is not flawed because people and corporations fail, failure is supposed to happen. Professor Meltzer at Carnegie Mellon correctly points out that, “capitalism without failure is like religion without sin–it doesn’t work.” When the government does not allow failure, it is not allowing capitalism to work. No matter how hard the government tries, it will never be able to put an end to failure, and the more they try to do so, the more damage they cause.

    You say we should not allow capitalism to go unchecked, but based solely on the historical record, I think that is exactly what we should do. The “Roaring 20s” was such a good decade because America had a president and a congress that cut taxes and allowed the market to operate without intervention. The great depression did not come from capitalism, it came from mismanagement of the Federal Reserve and government intervention. If capitalism was simply allowed to work, this country would grow economically to unknown limits–with failures and hardships along the way.

    Now on to your fourth paragraph.

    You say, “Well, for one thing, there is only so much profit a business can make from a product before it is left to cut costs in both quality and workmanship.”

    Poppycock. The complete and total opposite is true. A successful business looks for ways to improve its products so that you will throw out the old one and buy a new one. They don’t make cuts to the product, they first look for ways to cut labor costs–which I will get to in a minute. If the quality and workmanship of one company’s product goes down, someone else will step in to offer a similar product of better quality. It is up to the consumer to make a decision and buy the best product or the cheapest product.

    Let’s take the car. Ford Motor Company in the early 1900s did not make cars out of crappier materials in order to cut costs in order to increase profits. They invented cheaper ways to assemble the car and continually made improvements and innovations to offer a better product. It would be better to say, “there is only so much profit a business can make from a product before it becomes obsolete or someone else makes it better and cheaper. You make it sound like in order to be successful a business must be regressive and make more inferior products, when in reality the capitalist model promotes forward progress and constant innovation.

    Businesses do look to cut costs, as they should. When doing a financial analysis, an individual will try to stop spending money on things that he/she either can’t afford, no longer wants. or no longer needs. Business does the same thing; it tries to cut out waste and run as efficiently as possible. The first place most businesses look to cut costs is labor because that is usually the biggest expenditure. You cannot simultaneously demand higher wages from a company and complain that the company exporting jobs. A company is not a charity, it is trying to make as much money as possible, and they are under no obligation to sacrifice profits to pay an American a wage that is not competitive. Strong unions are what cause Americans to lose jobs by demanding wages that are not competitive with other nations.

    You say, “It means that the American workforce is now expected to work harder, longer, cheaper, and faster if we are to compete with the global economy now breathing down our necks.”

    All I can say is, yep that’s right. What alternative do you offer? You think Americans should work less hard, shorter, more expensive, and slower, AND we should still expect to lead the world economically? Yeah and all children should have equal access to unicorns. You think we should restrict trade with the rest of the world? That’s fine. You can explain to the 14 year old Indonesian factory worker why he no longer has a source of income to feed his family.** After that, you can explain why there are no jobs in the United States because it will be virtually impossible to run a profitable business because labor costs will be too high and productivity will be too low.

    Your assertion that Orwell was talking about corporations in 1984 is completely ridiculous. And even if he was, corporations taking over the role of government would be a breakdown in the capitalist system, not its logical conclusion.

    As long as we have freedom we will have capitalism. You cannot restrict capitalism without first restricting freedom. The role of government is to protect its citizens from foreign and domestic threats by maintaining a military and a police force, a a system of justice to prosecute injury doers and protect victims. Any deviation from that is not only unconstitutional, it is wrong.

    -Austin Caroe

    *1.Losing Ground: American Social Policy 1950–1980 in 1984 by Charles Murray. Read this book.
    2. http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx. Great article on the new deal.
    3.http://www.mackinac.org/article.aspx?ID=356. This article is about why minimum wage has done significant harm.
    I could list many more sources, but those should be enough to get you started.

    **http://www.nytimes.com/2009/01/15/opinion/15kristof.html. “Sweatshops” are dream come true for many in the developing world.

  4. Erin Says:

    Amen Austin!

  5. The Destructionist Says:

    China pulled back its overseas production on Monday to concentrate on bolstering its own internal consumption (a.k.a. Isolationism/Protectionism), while airline stocks fell and U.S. stocks dropped below flash crash lows due to the euro.

    BP CEO Tony Hayward still refuses to admit to the world just how difficult it will be to drill that relief well he’s been telling us all about. Apparently, the odds of getting it right the first time is astronomical, according to noted Professor and theoretical physicist Dr. Michio Kaku. Doing so correctly on the first try would be, in his words, “like winning the lottery.” Dr. Kaku went on to say that most likely, BP will have to drill over and over again to effectively get a handle on the situation; a process which may take months, if not years, to accomplish. (Can you dare to imagine the effect and impact on our oceans and wildlife?)

    Hungary’s huge financial debt (just one of several European countries due to suffer economic woes this year) will spark an even deeper decline and devaluation of the euro.

    Added news of certain U.S. indicators heading in negative territory in the next few days will push world markets even further downward. (I wouldn’t be at all surprised if the Dow Jones fell another 200 points by June 21st.)

    It doesn’t take a math-wiz or soothsayer to figure out what’s going on here. All you need is common sense and the ability to think a few steps ahead, nothing more.

  6. Austn_from_Vandy Says:

    You will have to excuse me “destructionist” but it seems every example that you sight supports my position.

    The oil spill is as bad as it is because the government BP forced to drill at a depth that makes it nigh impossible to fix a problem like this. If they were allowed to drill closer to shore, they could send down divers to work on the problem and fixing it would be far easier. Did BP make a mistake? Yes. Has it caused immense amount of damage? Yes. Should they pay damages to all the victims? Yes.

    What is going on here is that the market has been stifled to a point that recovery seems bleak. The solution now is for government to step back, cut taxes and regulation, and encourage private investment and free enterprise. Take a look at the recession of 1920–
    http://mises.org/daily/3788

    Or we could borrow at unprecedented rates and throw money at problems and HOPE things CHANGE.

    -Austin Caroe

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