How much is a trillion?

A trillion dollars used to be a sum that never naturally came up in normal conversation. Now all of a sudden, it’s the standard unit we seem to be using to talk about our economic problems and what we’re trying to do about them. Fortunately, I think I finally got a handle on what $1 trillion really means.

A trillion dollars is about the total amount collected in income taxes by the U.S. federal government in fiscal year 2006– $1.04 trillion, if you’re curious to use the exact number. That gives me a simple rule of thumb for personalizing these numbers. If I want to know what an additional trillion dollars in government borrowing or spending will mean for me, I just imagine what it would be like to pay twice as much in federal income taxes for one year.

So, for example, with the President’s proposed budget calling for deficits of $1.75 trillion for 2009 and an additional $1.17 trillion for 2010, after 3 years of paying twice as much as I paid in 2006, I’d have about paid off my share of the bill for the first two years of the proposal.

Couldn’t the government get its hands on that $3 trillion from, like, somebody else? Uncle Sam did collect an additional $838 billion from social insurance and retirement receipts in 2006. But pretending that a further raid on Social Security is somehow going to fill the gap is pure fantasy. Then there’s that $354 billion in corporate income tax receipts. No doubt there’s going to be an effort to grab more out of that cookie jar, though I’m afraid that such efforts will prove to be hugely costly economically and not produce nearly as much revenue as some may dream.

Or maybe the Federal Reserve could help out some. The total currency in circulation at the moment is about $900 billion. If the Fed were to create as much money in the next year as it did in total over all the preceding 95 years combined and use it to buy up some of the outstanding Treasury debt, it would doubtless produce an inflation rate in excess of 100%, but at least it would get us most of the way through another of those trillion.

Most of the way.

Originally published at Econbrowser and reproduced here with the author’s permission.

3 Responses to "How much is a trillion?"

  1. Guest   March 5, 2009 at 7:57 am

    I always say, ‘Imagine 1,000 billion dollar businesses closing down tomorrow”.That’s a trillion.

  2. JPB   March 6, 2009 at 3:31 am

    It would take approx 16 billion $ to give clean water to all children in the world …Those children we see on TV that die from severe dehydration or other unpleasant diseases linked to water quality …That puts into perspective the size of wasted money they give to corrupt bankers that deserve only to be hung without trial. In Belgium, we say that bankers and insurers are the worse thieves in the world. They take your money and do everything they can to keep it for themselves.