Saturday, March 10, 2007

What's a Billion

We see more and more big numbers in the news, numbers so big that it's not easy to understand what they mean. A simple way to estimate the meaning is the cost to an individual American. Here are two simple ways to figure out what a billion dollars of U.S. Government expenditure means to such a person:

Way 1 (By the share of the population): The Bureau of the Census estimates the U.S. population to be 298,444,215. So if the Government spends $1,000,000,000 (one billion dollars) your share of it is about $3.35:
     $3.35 = $1,000,000,000 / 298,444,215
= A billion dollars divided by the population.
Say $3+1/3 per billion spent by the government.

Way 2 (By the share of the money): The Department of Commerce estimates the U.S. Gross Domestic Product to be about $13,220,000,000,000 ($13.22 trillion dollars). So if the Government spends $1,000,000,000 your share is about 7+1/2 cents for each thousand dollars you earn:

   $0.076 = ($1,000,000,000 / $13,220,000,000,000) * $1,000
= A billion dollars share of the GDP times a thousand dollars.
Say seven and a half cents per thousand dollars earned per billion dollars spent by the Government.

As an example, what has the war in Iraq cost a somewhat prosperous family, of two people earning, $40,000 each? So far the appropriations for the war come to about $350,000,000,000 (three hundred billion)
Way 1:  350 Billion spent by the Government
2 people
$3.35 cost per billion spent
$2,345 TOTAL = 350 * 2 * $3.35
Not enough to buy a car, but enough to notice.

Way 2: 350 Billion spent by the Government
$80 Family income in thousands
$0.075 Cost per thousand earned per billion spent
2,100 TOTAL = 350 * 80 * 0.075

2 comments:

Nancy said...

Jonathan, very interesting and well stated!!

N.

james oh said...

We, at http://liftyouup.blogspot.com, are pleased with your presentation of huge figure so that the reader is able to imagine/figure out the amount easily. Well done and keep it up.