What’s Another Trillion?

All this talk of a trillion dollars.

There are 309 million people in the U.S.

A trillion divided by 309 million yields roughly $3250 per person, or $13,000 for a family of four. This is a lot of money. It’s a bit more than a quarter of what the average U.S. household earns in a year. It’s a down payment on a house, it’s the price of a decent used car. It’s the kind of debt families take on all the time, but not every year. And it’s amortized, like a mortgage, over many more years than an auto loan. Which means we’ll pay more but have longer to do it.

It’s about half what we already owe on houses, credit cards, and autos.

It’s about one fourteenth of the U.S. government debt, which is growing but which is still only a fraction of what it was after WWII (as compared to GDP). And as a fraction it’s not much: we safely borrow 2.5 times our income to buy a house, admittedly a once- or twice-in-a-lifetime debt.

Interestingly, it’s also about one fourteenth of the U.S. GDP.

The point, to me, is not really the size of a trillion dollars, which is substantial but not outrageously so, but how it relates to our health and life as a nation. To borrow this much money means little to a young, healthy family with two working parents. It means a lot more to someone about to retire on a fixed income, or to someone who has just lost a job.

The question may be put as an analogy: How old are we as a nation? Are we young and strong, facing a growing income and years to pay off our debts? Or are we old and weak, facing years of declining income with little time left to pay off our debts?

It seems to me that the safe assumption is neither of these. We shouldn’t assume growth that we can’t verify, but, within the bounds of conservative estimates, we shouldn’t assume that our days in the sun are numbered or over. We should assume that our income and expenses last year are a good predictor of what they will be next year and for the foreseeable future.

From this point of view, it seems clear that a trillion dollars is not an amount we can borrow every year, but, compared with our GDP and existing debt, it’s just not that much. Assuming we’re borrowing it for the right reasons.

After all, we spend less than 7/10 of a trillion dollars a year on educating every single child in the United States.