Some Simple Numbers

I’m a mathematical simpleton: I like numbers, but not too many and only when I can understand them and how they all fit together.

For instance, let’s consider the federal budget since 1996:

2010 United States federal budget – $3.6 trillion (submitted 2009 by President Obama)
2009 United States federal budget – $3.10 trillion (submitted 2008 by President Bush)
2008 United States federal budget – $2.90 trillion (submitted 2007 by President Bush)
2007 United States federal budget – $2.77 trillion (submitted 2006 by President Bush)
2006 United States federal budget – $2.7 trillion (submitted 2005 by President Bush)
2005 United States federal budget – $2.4 trillion (submitted 2004 by President Bush)
2004 United States federal budget – $2.3 trillion (submitted 2003 by President Bush)
2003 United States federal budget – $2.2 trillion (submitted 2002 by President Bush)
2002 United States federal budget – $2.0 trillion (submitted 2001 by President Bush)
2001 United States federal budget – $1.9 trillion (submitted 2000 by President Clinton)
2000 United States federal budget – $1.8 trillion (submitted 1999 by President Clinton)
1999 United States federal budget – $1.7 trillion (submitted 1998 by President Clinton)
1998 United States federal budget – $1.7 trillion (submitted 1997 by President Clinton)
1997 United States federal budget – $1.6 trillion (submitted 1996 by President Clinton)
1996 United States federal budget – $1.6 trillion (submitted 1995 by President Clinton)

So here we have over a doubling of government spending in 14 years.  Is this in anyway sustainable?  Do we need twice the government now we needed 14 years ago?  Some of these increases year-to-year may seem slight, but for me, $200 billion is no chump change!

And consider this: if President Obama thinks a $780 billion stimulus package would help the economy, I suggest he slash the federal budget by $2 trillion dollars and see what kind of stimulus is really possible!  In fact, let’s do an exercise to see what would happen if he did.

President Obama says that the $780 billion is justified to save or invest in 2.5 to 3 million jobs.  Let’s suppose that it results in 2.5 million new jobs (highly unlikely, in my opinion).  Let’s calculate the price per job: $312,000 of taxpayer money.

Now, let’s consider how much those jobs cost when done voluntarily.  US GDP (a measure of total economic power) is roughly $13.7 trillion.  There’s about 130 million employees, if there’s full employment.  With unemployment running at about 8 percent, let’s call it 119,000 employees in the U.S.  Total cost per employee: $115,126.  That’s about a third of the price per job.

Now let’s say he puts $2 trillion back in the economy (for me, government spending is money taken out of the economy) by slashing government.  Based on the price per employee of $115,126, how many jobs would be created from this type of stimulus?  17,372,270.  That would solve our unemployment problem and then some.

What does this tell us?  At the very least, it illustrates the idea that the market is much more efficient at allocating resources than the government (roughly three times as much). 

Also consider that if the $2 trillion of government spending was pulled from areas which hamper job growth and restrain businesses from starting and growing, how much easier it would be for a small business owner to get going and hire people.

Now that’s a stimulus package.

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1 Comment

Filed under Austrian Economics, fiscal policy, Libertarian, politics, recession, role of government

One response to “Some Simple Numbers

  1. MH

    Mormon Paleo,

    I was wondering what you think of Joseph Smith’s presidential platform? I just did a post on it at http://www.mormonheretic.org/2009/04/21/joseph-smiths-presidential-platform/

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