ABOUT THOSE PESKY BIG NUMBERS AND FACTS ABOUT THE USA

As informed citizens it is necessary to make decisions. The recent economic crisis is a prime example. Is that $700 billion dollar bail-out sensible or reckless? Was it wise or appropriate for President Bush to submit that massive $2.7 billion dollar budget for 2007, in which he cut $36 billion dollars from Medicare and called for a bloated defense budget ($481 billion dollars) then had the nerve to add a "supplemental war budget" of $141 billion dollars on top for the conflicts in Iraq and Afghanistan. As citizens we should be able to evaluate these expenditures as needed, appropriate or excessive. But we have to have some figures at hand first. The following is only the "back of an envelope" sketch of our economy, but perhaps it is a beginning that may encourage you all to follow these important lines of evidence further.

First let's get these big numbers straight. We all know how big a million is. Take one thousand $1000 dollar bills and stack them up into a neat pile. That is a pile of a million dollars. Collect a thousand piles like that to form a bigger one to add-up to one billion dollars, then put together a thousand of those billion stacks to form a one-trillion dollar one. So that's all there is to those "big" numbers you hear bandied about when using below. So think of a trillion as one thousand billions and a billion as one thousand millions. But caution here, when translating for in France and the UK the terms million and billion may not be the same numerically.

Let's go on then.

President Bush's 2007 Budget

Total receipts: $2.4 trillion dollars from:

$1.1 trillion - Individual income tax
$869.6 billion - Social Security and other payroll taxes
$370.2 billion - Corporate income tax
$65.1 billion - Excise taxes
$26.0 billion - Customs duties
$26.0 billion - Estate and gift taxes
$47.2 billion - Other

See: http://en.wikipedia.org/wiki/2007_United_States_federal_budget

Expenditures:
Military Spending (Defense plus two war expenses) =$699 billion
Social security=$586 billion
Medicare= $394 billion
Interest on debt=$244 billion
Others....
Total = $2.8 trillion
See:http://en.wikipedia.org/wiki/2007_United_States_federal_budget


GDP
The USA, gross domestic product (GDP) is a value we often see posted or hear referenced. It is often associated with a big number next to it. The concept of GDP is useful in that it provides a single descriptive term which can used to compare our economy over the years or relate it economies of other nations. But what does it mean? Imagine an hotel (or any other business) let's call this hotel the "Imperial Arms". It is a diverse enterprise with one hundred rooms to let, there are ten small stores on the ground floor that are rented, it has a barber shop, and hair salon that produce income, a small bakery, as well as a restaurant in the hotel. The "GHP" or gross "hotel" product of Imperial Arms is the value of all the goods and services the hotel produces from all its rents and other enterprises. In like manner if you were to tally up all the enterprises of the USA as a nation, the value of all its goods and services we could generate a term called the gross domestic product or GDP. For 2008 the USA GDP is estimated to be about $14 trillion dollars (14,000,000,000,000).

Since the term is a useful comparison, one may note here that this value ($14 trillion dollars) is equal to approximately 23% of the world gross national product (or the total of all the world- nation's GDP ). That is, the USA's economy produces 23% or nearly 1/4 of all the goods and services in the entire world. That's why it is the world's largest economy. In 2007, the next largest economy in the world Japan (if we were to exclude the EU which is a group of nations)with a GDP (in US dollars) of $4 trillion dollars, then Germany with $3.3 trillion, and China $3.2 trillion, while the UK, France, and Italy follow with around 2.5 trillion each. See http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal).

As the world's biggest economy the USA is the largest importer of goods and the third largest exporter. Canada, China, Mexico, Japan and Germany are the USA's top trading partners.
The USA economy is termed "postindustrial" that is, the US does not manufacture much anymore...but it concentrates its activities on money-management and other services. These "services" in the private sector account for @ 68% of its GDP, while government services account for @12%. The remaining 20% is in part accounted for by manufacture of chemical products. In addition,it is a leading producer of electrical and nuclear energy, liquid natural gas, sulfur, phosphates and salt, as well as a leader in world production of corn (maize) and soybeans. The agricultural sector accounts for only 1% of GDP.

Some other interesting facts and numbers about the USA. Only 12% of its labor force is unionized (as compared to more than 30% in western Europe). The US ranks first in the world in hiring and firing workers. However, labor productivity per hour is lower than top ranking Norway, France, Belgium and Luxembourg. A year's employment for a US worker grew by 200 hours from 1973 to 2003. The US welfare state is the most austere ("close fisted") in the entire developed world. There is little of a "security net" for workers in the US. For example, of 21 industrialized nations the US came up last in a ranking of children's well-being. In general, US corporate income tax rates are generally higher, while labor costs and consumption tax rates are lower. In 2007 the median income of US citizen was $50,203 (ranging from a high of $68,080 in Maryland to a low of $36,338 in Mississippi). Between 11-15% of Americans fall below the poverty level ($21,027 for a family of four) each year and nearly 60% of the population spends at least one year in "poverty" between the ages of 25 and 75 years. The US has the greatest income inequality among developed nations. (In 2000 the United States had the most highly concentrated wealth distribution (10% of population held 70%@ of the wealth, UK 56% , Germany 44%, Finland 42%) of any Western democracy except Switzerland.) That is its wealth is not distributed across the population but concentrated at the top. For example in the USA the richest 10% possess nearly 70% of the country's household wealth, while the top 1% possess more than one-third of the net wealth of the nation. Thus the vast majority of the population, 90% of US wage earners and workers scramble for only one-third of the nations largess, while the other seven-tenths of the wealth had been garnered by the privileged few. The fact is that the vast majority of Americans have little of no wealth other than their houses of those that have their own homes. See http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

Though the US health care system far outspends any other nation in the world, the level of expenditure is not reflected in the relative ranking of the health of the US population which has a shorter life-span, higher incidence of disease (morbidity) and higher mortality in the comparisons to the rest of the industrialized nations. In 2000 the World Health Organisation (WHO) ranked the USA health care system as 37th in the world in overall performance. Remember this is for a nation that is the richest in the world. The health care system is a mix of privately funded and government sponsored services. In 2004 private insurance paid 35% of personal health expenditures, 15% was paid by the individual and 44% was paid by government. In 2005, 47 million citizens in the US remain uninsured. Consequently, these factors have an effect of the well being of the citizenry. In the US, life expectancy at birth is 78 years while in Western Europe in general it is approximately 79 years and in Norway, Switzerland, and Canada it is higher at approximately 82 yrs. Over the past two decades US life expectancy has dropped in the US from 11th to 42nd in world ranking. The US infant-mortality rate ranks with its life expectancy rates, at 42nd in the world. In addition, one third of the population is obese and obesity has doubled in the last 25 years. In the USA obesity-related type-2 diabetes is considered epidemic by medical professionals. The US adolescent pregnancy rate of @80 per 1000 women is four times that of France and five times that of Germany. In the USA, one in 67 women in the child bearing age (14-44 years) will have an abortion---a rate higher than most western nations. As for abortions thought they are more common in the US many states ban public funding, require waiting periods and demand parental notification for minors.

Federal or National Debt
What about US Debt? See:http://www.brillig.com/debt_clock/ The present US National debt is, as I write this, $10.6 trillion dollars and growing. The national debt has continued to rise by nearly 4 billion dollars a day since September 2007.

The US Federal Debt is the amount of money owed by the US Federal government to holders of US debt-instruments, i.e. bonds and promissory notes or similar paper. Early in November 2008 the US federal debt passed the $10 trillion dollar mark for the first time in US history. Thus with the GDP at $14 trillion dollars and the debt at $10 trillion 10/14 = 0.714 we conclude that the US now owes to creditors about 71.4% of the amount of goods and services we produce each year. That would be the equivalent of a man who earns about $50,000 annually, having debts totaling about $35,000. Banks normally investigate into such matters prior to granting a loan or mortgage A standard or "conforming" loan would generally require a debt to income ratio (DTI) of 28/36 or consider that your total debt obligations should be between 36 to 40% for a sound domestic economy.


Deficit
What about the US budget deficit?
A deficit is as it sounds the opposite of a surplus. When a government spends more than it collects in taxes it incurs a deficit. Before the development of bonds and other promissory notes a government's with a deficit could only turn to wealthy individuals (as the Rothschild family of Frankfort Germany) or the church in the Middle Ages, or other countries.

For example: In 2004 the US (federal) government had a GDP of $11.7 trillion dollars) and had tax revenue (income) of $1.862 trillion dollars (td) but the government spent $2.338td that year or$2.338 td-$1.862 td= $0.476td or $476 billion dollars or nearly five hundred billion dollars more than it took in. That is it had a budget deficit of $476 billion dollars! The government actually spent 476/1862 = 0.256 or nearly 26% more than it received in taxes. How can it spend more than it took in in taxes? It borrowed the money ($500 billion) from other countries which purchased bonds or promissory notes for that amount. They give the money and the USA then pays them interest on the borrowed money.

Let's us examine this in terms of our typical wage earner who earns $50,000 dollars annually. To operate in a similar fashion as the US government, this wage earner would have had to somehow borrowed (50,000 x 0.256 = 12,800) $12,800 dollars that year to spend a total of 50,000+12.800=$62,800. This wage earner would have a spending deficit of 25.6% as in the actual US government case for 2004 above. But that would add on to the 35,000 debt this person had and now his total debt would be $35,000 + $12,800= $47,800. We can see that continued deficit spending would of a similar amount in the following year would carry this wage earner to a point where he or she would owe more than they are earning. That is not a strong financial position to be in. A bank looking at these figures (well a bank after the banking collapse of Fall 2008) would certain not see this person as a perspective candidate for a loan. And that's where we find ourselves today as a nation.

Review: 2008 GDP= @$14trillion dollars,
Estimated 2008 Budget deficit =$1 trillion dollars,
Federal Debt: nearly $11 trillion dollars.

Now when you hear those numbers...they will seem familiar.