Penney Wise and Pound
George H. Blackford © 7/20/2013
In trying to understand the economic system
it is difficult for most people to keep the numbers in
perspective since the numbers are astronomical at times, and are
truly mystifying to those of us
who have never had to worry about a million dollars let alone a billion or a
The importance of perspective in
looking at economic numbers can be seen by examining the story underlying a headline that recently
(4/4/13) appeared in Bloomberg News,
Millionaires Got $80 Million in Jobless Aid in Recession. According to the author,
The $80 million represents less than 0.01 percent of
this yearís $845 billion projected
deficit. Yet the
unemployment aid to millionaire households underscores the lack of
means-testing in some federal aid programs . . .. The aid also is a
reminder of the difficulty of reining in spending.
The fact is that, since unemployment benefits are
taxable income, some 35% of that $80 million was recouped in income taxes
on those benefits, only $52 million was kept by the millionaire
recipients, and that $52 million is not only less than 0.01% of the $845
billion projected deficit (52/845,000 = 0.0000615), it is less than 0.002%
of the $3,537 billion federal budget in 2012 (52/3,537,000 = 0.0000147).
In addition, it is a mistake to think we can reduce
the budget by even this piddling amount by converting our unemployment
insurance program into a means-tested welfare
program since this ignores the added cost of the increased bureaucracy
it would take to investigate the income status of the millions of
beneficiaries in this program. By simply making unemployment
benefits available to all who pay into the system, irrespective of income,
those bureaucratic costs are avoided, and the efficiency with which
payments can be made to the unemployed is increased dramatically.
But the real
absurdity here is the delusion that this $52 million has something to do
with the $845 billion projected deficit or the
difficulty of reining in spending in a $3,537
billion budget: What is the point in wasting time and energy
discussing the fate of $52 million within the context of an $845 billion deficit
and a $3,537 billion budget?
That's like worrying about $52 when your total expenses are $3,537,000 and
you are $845,000 in the hole.
we could reduce the deficit $52 million a day by concerning ourselves with this sort of
nonsense it would take 44.5 years to solve a
$845 billion deficit problem in this way (845,000 / 52 / 365.25 = 44.4901). This is the epitome of
what it means to be
penny wise and
pound foolish, and this kind of foolishness arises from a failure to keep
the numbers in perspective.