The Obama Tsunami

Big numbers can be hard to visualize.  What’s the difference between a million and a trillion?  They both sound like big numbers, but a trillion is 1,000,000 times bigger than a million.

The terrible earthquake and tsunami in Japan last month helps visualize some big numbers.  Surely you’ve seen image after image of the terrible destruction the Japanese have suffered.  Recent estimates place the damage suffered in Japan as high as $309 billion.  Those images give some indication of how massive destruction of that magnitude is.

Meanwhile, the 2011 federal budget deficit in the United States is about $1.5 trillion, or about five times as large as the damages from those natural disasters in Japan.  The Japanese have some major work ahead to pay for the damages those natural disasters inflicted on them.  Meanwhile, future taxpayers in the United States will be looking at paying for about five times that much due to the federal government’s borrowing this year alone.

The US economy is about 2.8 times as large as the Japanese economy, so one might argue those numbers are not directly comparable.  If the US economy were the size of Japan’s economy, the budget deficit would be only $536 billion, or 1.7 times as large as the damage done by those natural disasters in Japan.

Japan will have to pay to rebuild, but the cost imposed on future US taxpayers from just one year’s budget deficit is still substantially larger than the rebuilding cost in Japan.  That should help us to visualize the cost the federal government is imposing on the nation through fiscal irresponsibility.

From a financial standpoint, many of the losses suffered in Japan were covered by insurance, while the entire cost of the US budget deficit will be borne by future taxpayers.  But the point of the comparison is to try to make those big budget deficit numbers more understandable.  Every year, the US government is inflicting a cost on future taxpayers greater than a huge natural disaster.

The way those deficits are looking right now, some observers have said that if we don’t get the budget under control, we’re going to be like Greece.  Let’s think about that a bit further.  Greece got a bailout from the EU, mostly thanks to Germany, but in return gave up some fiscal autonomy.  Greece is now more under the control of other countries, and less of an independent nation.  When we run into the same problems, Germany won’t be able to bail us out.  Who will?  China?

Am I thinking too far ahead to imagine what kinds of concessions we will be making to China to rescue us from our fiscal irresponsibility?

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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