Via Tyler Cowen, James Hamilton explains what a trillion means:
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.
I don't really understand this. It's like helping someone process the size of a $300,000 mortgage by asking them to imagine paying it back by Friday. That's not how we pay mortgages and it's not how the government pays its debt. So how is this helping us conceptualize the concept of a trillion dollars?Beyond that, it's also not clear to me that the number should be understood on its lonesome. If we're going to try and understand a trillion in new government spending we should also be considering the impact of a trillion in lost output, or health costs, or whatever the spending is meant to offset. That might, of course, still be a bad deal. But the reason we're talking about such large numbers is that we're faced with large tradeoffs. And you can't understand the numbers without considering the tradeoffs.
