Large Numbers

You may have heard of our “Large Number” difficulty. Human beings can all relate to numbers like 5, 100, 30,000 or so, but when the numbers reach a billion or a trillion, we sort of go blank. I have found a rather simple and effective way to make understanding large numbers easier – I remove some of the zeros.

For example, the US deficit is about $1.4 trillion. That’s $1,400,000,000,000. Neither you nor I nor any other normal human being can “get our mind around” that large number. Meanwhile, congress is discussing spending cuts of $50 billion or so. That number is too big to comprehend, too.

So, let’s do the zero-ectomy and put these figures in perspective. I’ll remove nine zeroes from both numbers. The US deficit becomes $1,400. That’s a number most of us can relate to.

Next, congress is thinking of cutting $50 billion, or $50,000,000,000. Removing nine zeroes again, we get $50.

So, to put the deficit and spending cuts in perspective, the US government has a $1,400 bill, and they are quibbling over $50. That means that if they could miraculously hold government spending where it is, and cut out $50 billion of Washington spending every year, we’d be out of debt in only 28 years.

Oh, not quite. There’s interest to pay. Even at 5% (ridiculously low) the interest on $1,400 is $70 per year, so $50 won’t even pay the annual interest. The truth is, we would go deeper into debt each and every year because of the interest. After five years, we’d owe $1,500! (Errr, $1.5 trillion.)

Think of it like your credit card. You owe $1,400 and you pay $50 per year. That does not pay the interest, so while you pay, your debt will increase every year until you are bankrupt. Same goes for Uncle Sam.