Friday, September 19, 2008

How Much is a Trillion?

I've now seen the following argument made in a couple places in the last few days: because the costs of the financial-system bailout are so big, neither candidate will have the money to implement his proposals if elected. 

Here's Ben Smith, for example:

Mike Allen reports that Hank Paulson will announce a trillion dollar plan shortly.

A consequence of this, and of the crisis: Whoever is in office next year will likely have to toss his taxing and spending plans out the window.

Maybe this is true. But if it is, then the MSM need to do a better job of explaining why a trillion bucks is such a huge amount. To understand why, let's take a look at a key excerpt from the latest analysis by the widely-accepted-as-refereee Tax Policy Center:
Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by an estimated $4.2 trillion (McCain) and $2.9 trillion (Obama) over the next 10 years. Both candidates argue that their proposals should be scored against a "current policy" baseline instead of current law. Such a baseline assumes that the 2001 and 2003 tax cuts would be extended and the AMT patch made permanent. Against current policy, Senator Obama's proposals would raise $600 billion and Senator McCain's proposals lose a similar amount.
The point here is that McCain's plan is currently forecast to cost $1.3 trillion more than Obama's. In past analyses, I believe that number has been $1.4 trillion; it certainly has consistently been more than a trillion.

So, if being down a trillion bucks relative to expectations is so much that Obama should be considering scrapping his whole deal, then it seems to me that for the last several months, McCain should have been facing articles noting the impossibility of his plan. (I should note that Megan McArdle argues that the Wall Street meltdown means that at least in the short run Obama won't be able to raise much revenue by increasing the highest-income bracket's marginal rate; I don't know whether Megan's right empirically, but her argument's a plausible one.)

I could go on about how, while a trillion dollars is a lot, we've added X-trillion dollars in debt over the last 7 years, and so on. 

I want to be clear that I'm not accusing the press of bias here. Rather, I think the issue is that people look at the same facts differently when they occur during a crisis versus day-to-day situations. 

I do hope that folks in the media will think hard about this issue: if a trillion dollars is so much money, then even leaving aside distributional issues, John McCain's tax plan is and has always been way irresponsible.


Kevin Hayden said...

I heard it said that Bush's reign has added $5 trillion to the national debt. With a trillion dollar bailout (which I assume is a conservative estimate), that would be $6 trillion added to the debt.

Divided by 305,000,000 Americans, that works to roughly $19,700 per every man, woman and infant. Not counting the interest that will accrue servicing that debt.

That's as best as I can conceptualize it for anyone. For a family of four, kiss $78,800 goodbye.

And if I recall correctly, 2/3rd of the corporations in this country pay no taxes at all, while the biggest get billion dollar bailouts. I bet they wear their flag pins proudly all the way to the Social Welfare Office, after which the CEOs cash their bonus checks for a job well done.

Mind you, I'm honestly not envious a bit. I sleep better at night being impoverished and sharing my bread with anyone and everyone.

The comic relief of conservative deregulators trying to sell their snake-oil values and telling me about their great bearded guy in the sky has provided me many hours of mirth. The only invisible friend I have is the ghost of Teddy Roosevelt. We just howl at the dimwittia bugs that scurry from boardroom to boardroom, looking for fresh hosts to suck the blood from.

And my only real concern is in the lessons I hope my children and other kids gain from the freak show: befriend a hobo, but beware the gray-suited stranger selling morality and free market prescriptions as a solution to the vapors. There's a reason they scurry from daylight and roar like they're barking mad.

Avoid them, but never turn your back on them, because rabies injections are painful.

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