Yesterday’s post started discussing how to better think about spending amounts at the level of large governments (i.e. trillions of dollars). In it, I used the analogy of a person with $1,000 (an amount of money better understood by most people), and how $1B is to $1T (government level spending) as $1 is to $1,000 (individual level spending).
While that approach is helpful, I would argue a better way to look at government spending is per capita (or per person). To use some roughly accurate but friendly numbers, let’s assume the US government spends $7T ($7 trillion; $7,000,000,000,000) a year, and that the US population is 350M (350 million; 350,000,000). Instead of tossing around the $7T number which is hard to really wrap your head around, you do the following simple operation:
\[\frac{\operatorname{metric}}{\operatorname{population}} \rightarrow \frac{$7T}{350M} = $20,000\]This means the government is spending on average $20,000 per person in a year. Obviously, the bulk of money comes from taxes, so you could think of that $20,000 as the average annual, per person cost for all the services the government provides. Then with that in mind, you can consider whether you think you’re getting your money’s worth or not. (Note, I should be clear not everyone is paying $20,000 in taxes. Some are paying much less, e.g. children who don’t work or pay taxes. Others are paying much more.)
And actually, we can improve the metric further by looking at monthly costs / spending instead of annual. If we do that, our $20,000 per year turns into $1,666.67 per month.
Finally, since you’ll often read / hear about XYZ government program costing __ trillions or __ billions of dollars. Here are a few quick conversions you can use to think about how much that actually is on a per capita basis: