By the Numbers

A defining element of the ongoing economic crisis has been an endless series of large numbers. Everything seems to be measured in the billions, hundreds of billions and trillions. So it is with large, global losses and bail-outs. Contextualizing and making real such large numbers is rare. What follows is an attempt to ground many of the leading numbers bandied about of late. I have used all publicly available numbers and divided them by the US population. The idea is to give averages per person. Of course we are far from equal in our wealth, assets, income, and risk exposure to various programs and plans. Dividing these huge numbers by our population offers a way to reduce the size of the figures and hint at the average per person costs. Keep in mind that equal burdens are not the order of the day. There is not equal benefit to our program choices either. We need greater equality to achieve balance and emerge from this tumult.

Why slog through all the numbers? Because they allow us to see where we are and how much we are investing in one particular future. The size of the numbers also gives us clues as to just how reliant we will be this year on the desires of global investors. Understanding the extent of the gap and the efforts to fill it offers a chance to ask the big questions. Is this money well spent? Will it work? Are we investing in the kind of future we want? When we borrow this much are we making policy or do we enter a series of policy compromises with our various investors-foreign and domestic?

The Basics:
The Gross Domestic Product (GDP) is a good place to start. GDP attempts to measure the dollar value of all legal final goods produced in the US. 2009 Congressional Budget Office (CBO) GDP projection is $14.057 trillion, or $45,937.90 GDP per head. End 2008 Federal Reserve Z1 Table disposable personal income was $10.652 trillion or $34,810.46 per head. We live in a $14 trillion economy with average GDP per person of $45,937. Our disposable income per person in 2008 was an average of $34,810. These very basic figures - huge though they are - allow us to place other huge numbers in a context that makes them more manageable. All per person figures are based on the US Census count of 306 million Americans as of April 01, 2009.

Budget/Budget Deficit:
2008 CBO Projections for Government revenue is 2.524 trillion or $8248.37 per head. Our taxes, fees and the government services we buy make up government revenue. Added to this revenue is the money that our government borrows. Outlays (government spending) are estimated at $2.983 trillion or $9748.37 per head. This gives us about $459 billion in official shortfall for 2008, $1500 per citizen. The 2009 deficit projection is $1.67 trillion or $5447.71 per head. This is based on 2009 CBO Federal revenue estimates of $2.159 trillion or $7055 per person. Outlay or spending estimates for 2009 are $4.004trillion or $13,804 per person. We are talking about huge numbers well into the thousands of billions. At the present time our national debt is $11.2 trillion with $6.9 trillion outstanding and publically owned. The rest of the debt, $4.3trillion, is held by various government offices. Some of the national debt our government owes various branches of government. Some of our debt is owned by American firms, households and associations. Much of our debt is held by foreign central banks. $6.9 trillion in public debt breaks down to $22,549 per citizen. Foreign entities held 3.07 trillion in Treasury debt at the end of January 2009, 45% of the public holding. Foreign ownership will have to rise sharply this year.

Huge shortfalls mean massive borrowing. Our government will have to borrow much of the money available in global markets this year. Across the course of 2009 the US Treasury will borrow $2.25 trillion or $7352 per person. That amounts to over 20% of average disposable personal income. Our plans are contingent on massive and global demand for our debt despite the low interest rates we offer. If there is a stumble on that front, it will not be pretty.

The TARP:
The Emergency Economic Stabilization Act authorized the US Treasury to buy or insure $700 billion in troubled assets beginning in October 2008. That amounts to $2286.32 for each of America's 306 million citizens. Of the initial $700 billion, about $132 billion remains, that amounts to $431.37 per American. 81% of the funds have been spent or promised with 19% remaining to be allocated. The TARP is $241 billion more than the projected 2008 budget deficit.

The majority of the programs aimed at banks come from the Federal Reserve and, more lately, the Federal Deposit Insurance Corporation (FDIC). The TARP is a very small slice of the aid made available to financial institutions.

The Problem is Debt, Mountains of Debt:
The Federal Reserve (Fed) keeps many numbers that allow us, with some delay, to track the value of our assets and the value of our debts. ZI Tables give data on the levels of assets, debts, and ownership. The total value of all household real estate at the end of 2008 was $18.334 trillion or $59,915.03 per person. The total liability represented by all home mortgages was $10.453 trillion or $34,162.42 per head. This helps explain the sad and startling fact that the average American owns only 43% of their home. This is down from 59% ownership in 2002. The Fed does more than report the numbers. It moves markets, shifts polices, and has been growing its influence and activity very rapidly over the last 18 months.

The Fed has been instrumental and taken a leadership position in attempting to stabilize banks and financial markets. One way we see this is in the massive growth in the Fed's balance sheet. The Fed reports on its balance sheet every Thursday in its H.4.1 release. The Total Value of the Federal Reserve Balance Sheet last Thursday was $2.09 trillion or $6830.06 per capita. Over the last 12 months, between the second week of April 2008 and the second week of April 2009, the Fed's balance sheet expanded by $1.195trillion or $3906.37 per capita. The Federal Reserve Balance Sheet has more than doubled over the last year. More growth is assured by the tangle of new programs announced over the last few months.

Last, but not least, the Federal Reserve releases information on consumer credit. The G19Total Outstanding Consumer Credit release reports on total consumer debt. Total consumer debt - excluding mortgage debt - for February 2009 was $ 2.564 trillion, or $8379.08 per head. This includes student loans, credit card loans, auto loans, and personal loans.

Reading through all these numbers patterns emerge. We have household, creditor/lender and government debt problems. We are responding to them by borrowing large sums of money. This is in many cases necessary. However, we have yet to ask how we got here? We have yet to debate if all the spending is necessary and optimal. Is more debt the best answer to past debt? What, if anything, are we doing to reduce our dependence on debt? What are we doing to reduce our addiction to foreign credit? Sometimes the numbers help make clear the swirl of accusations and opinions that dominate mainstream media coverage of these issues.

We have been using Federal balance sheets to absorb bad debt. Most of the bad debt we have been moving to government balance sheet comes from firms and households. This means that we are committing future household earnings and forgone spending to fix some of our present problems. Some we don't fix. There is more pain to come from future problems with the mountains of debt outlined above. The system we have set up offers help in a hurky jerky pattern to leading institutions in trouble and some classes of distressed debtors. We are leaving many high and dry. Too little is being offered to the many hurt by the impact of the macroeconomic downturn. This is creating a growing base of anger in the society. Often it appears that an unhappy populace, in pain, lashes out and scans the headlines for the culprit of the day. The reasons for this anger are clear and compelling in many cases.

It is frightening and counter-productive to rush from scandal to scandal. There will be no easy or rapid solution. Thus, we must find the root causes of the debt problem and address them. We have done absolutely nothing on that front to date. So far, we are balance surfing and straining to get more credit at lower cost to various borrowers. Some of this is necessary and wise. Much is done to avoid the bigger deeper causes of the shifting, buckling debt mountain. This is an investment in keeping the problems but, shifting and softening symptoms. You can see the problem with that strategy above. There is too much debt and not enough broad benefit and coherence to the policies we are embracing. Given the size of our commitments and the long term costs of the efforts, we have to do better. We don't have limitless time or money. Look through the above numbers. Remember that averages hide our inequalities. Inequality and imbalance are the true root causes of the US and global meltdown. To fix our economy this must be addressed.

Comments

[mbaty]

The structure of the economy is balancing. We have to facilitate the process, but the balancing was inevitable. Too much inequality for too many means things have to change. They will either change because we decide to be smart about it or because it simply breaks down from the weight of it's many imbalances and it's lack of Integrity. Even if it's legal to 'scam' someone, that doesn't mean it's sustainable. Like the old debtor prisons, it's counterproductive and counterintuitive. Most people do not have the means to buy a house or they wouldn't put the final payment 30 years in the future. This is an example of lending institutions getting very greedy and trying to kill the goose that lays the golden eggs. Without any usury laws, you get big businesses charging whatever interest rates they want. Not only is it not smart in the long run, it's immoral, and we know it; hence, outrage. And when the very structure of a system is corrupt it has no logical choice except to break down eventually.

[Robert59]

These numbers are huge, but when you break them down to a per capital basis are they as staggering? I look at my wife and I and our total income and our total debt. The ratio is roughly we have 3 times as much debt as we do income. And I still have plenty of money when I pay towards that debt to live a very nice life.

On average per person disposable income is 34,800. Total debt per person is 65090 based on 8379 (consumer debt), 34162 (household debt), and 22549 (public debt). We're not even at 2 to 1 debt ratio and people are talking about the sky falling.

What Obama rightly pointed out as the bigger concern is health care costs. They will make the deficits the govt is currently running seem small if we don't do something to make them affordable. That's the 800 pound gorilla in the room.

[Robert59]

Remember, it takes money to make money. If Obama's vision comes to fruition we'll be in good shape. Since consumer consumption accounts for 70 percent of the economy and the foreigners who hold our debt have economies dependent on manufacturing they aren't going to have any choice but to finance our debt and at terms we dictate.
Contrary to what you think we hold the gun to their head, not the other way around. In a couple of decades this will be different because they will have well developed and huge middle classes. Until they do, however, they need us more than we need them.
We could shut off the flow of imports and our manufacturing capacity would meet the demand and because we have a well developed middle class and a 14 trillion dollar economy we could produce what we need and even pay the high taxes to finance the debt.
China or India don't have that luxury and neither does Japan or the OPEC nations. If we don't consume what they produce they collapse. The sole reason for a middle class in the OPEC nations is because of the need for oil. If renewables take off and fuel economy doubles or triples they are looking into the abyss.

[Sundialsvc4]

Let's start with "crime," shall we?

Let's acknowledge that trillions of dollars in "securities" and therefore "money" quite-literally do not exist ... and that the largest swindle in the history of the planet (no joke) has been committed right before our eyes. It makes "Tulipmania" look like corn chowder.

What's the value of doing that? Well, we know what to do about crime. We even know what to do when a bank has become insolvent. We know how to weigh "debt obligations" against the standard of "insurance," and when a Federal law is on the books to say that such "obligations" are (somehow) neither "insurance" nor "gambling," we also know how to smell a great big rat.

IF we stop viewing these things as "financially legitimate," we step free of the perceived obligation that we must somehow bail them out or live with them forever. We start dealing with them like they did on "Hawaii Five-O."

"Book 'em ..."

[KillTheMessenger]

No law, no crime. You lose.

[schatsie]

The really interesting figure is that 50% of the GDP in this country goes to the top 20%...So cut the gross GDP in half and divide that and you get about 30 grand per person... which puts us in the same class with Spain and Portugal. and they have socialized medicine...and we are paying 6 grand per year for that while they are spending less than 3 grand and have 6 weeks of vacation and a good pension/social security system...

And they bitch about paying taxes but think about it. most of their income is in tax preferrence categories and they run their personal expenses thru their companies, so their real income is significantly understated... Gotta love it.

[KillTheMessenger]

You could get the same services as the Spanish and Portugese... if you were willing to pay the same amount of taxes. Please look at the Spanish tax system and weep. They levy all kinds of taxes on property and transfer of property in addition to the VAT of 16% and income taxes similar to the US.

[Henry]

GDP, GDP,
Here is an example that is telling. A farmer produces 75000 bushels of wheat one year and the price is $3 per bushel. $225000 is his addition to the pie. Next year he again produces 75000 bushels of wheat and the price is $6 per bushel (and the GDP implicit price deflator is only 2.5%). His addition that year is nearly twice what it was previously even though he produced the same exact amount in bushels. Next year after that he made a decision to put all his grain in grain bins and not sell a single bushel. He produced again 75000 bushels of wheat but since noone knows this, his contribution to the GDP is -0-. So.... the vaunted GDP that measures production maybe isn't really what we pretend it is. (think of oil at $25 per barrel and oil at $142 for example)

[KillTheMessenger]

Farming adds very little to GDP (net farm income is only around $100 billion), but oil and energy in general do. Which is why energy independence is a real problem that we need to tackle and why energy related activities could be so advantageous for job creation.

[DwightinMesa]

Another EXCELLENT post, Max!!

We all can thank Dick Cheney and his boys at the CFR for the excessive government spending that
pushed us over the hill. Cheney admitted early in the Bush2 years that excessive spending
and use of credit during the Reagan and Bush1 years didn't seem to make any difference to the
Country's well being, and that there'd be no problem in defecit-spending taxpayer money during the Bush2 days. Well, since hindsight is 100%, ya gotta think he was wrong. (although his friends who
make up the wealthiest 15% of the country would think that the bottom 85% were wrong)

We've been duped by people of like mind both in and outside of the beltway who--it seems-- would rather climb a tree to tell a lie rather than stand on the ground and tell the truth.

Now all we can do it hang on for dear life.

There is a hard landing ahead, but if the people of the US are as smart and strong as I think they are, ultimately the "overspenders" who ruled Washington DC for the last 8 years will be put back in their rightful place.

[philistine]

Your post puts me in mind of a statistical math class I took in college. I remember wondering why the median held any importance in contrast with the average. Our economy over the last thirty years has provided me with the answer to that question. With so much of our wealth held by such a small percentage of the populace, the difference between median and average is very great. You might find it worthwhile to explore that idea further.

[KillTheMessenger]

Neither the median nor the average are particularly meaningful unless you know the rough shape of the distribution. And in this case I wouldn't use either. Percentiles are a much better measure.

[philistine]

I respectfully submit that comparing the average with the mean will tell you something about the distribution.