Recovery plan for idiots who don't understand big numbers

matthew's picture

I ran across the following blog entry today at http://kristofcreative.posterous.com/how-would-you-fix-the-economy . Once again, utter ignorance once numbers get large enough results in a popular-sounding plan that makes absolutely no sense once you break it down.

This is from an article in the St. Petersburg Times Newspaper on Sunday.The Business Section asked readers for ideas on "How Would You Fix the Economy?" I think this guy nailed it!

Dear Mr. President:
Please find below my suggestion for fixing America 's economy.
Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan.
You can call it the Patriotic Retirement Plan:
There are about 40 million people over 50 in the work force. Pay them $1 million apiece severance for early retirement with the following stipulations:
1) They MUST retire. Forty million job openings - Unemployment fixed.
2) They MUST buy a new American car.. Forty million cars ordered - Auto Industry fixed.
3) They MUST either buy a house or pay off their mortgage - Housing Crisis fixed.
It can't get any easier than that! If more money is needed, have all members of Congress and their constituents pay their taxes...

If you think this would work, please tell to everyone you know. If not, please disregard.

Hell, no, I'm not going to disregard such a preposterous suggestion. It's mathematical SUICIDE for our nation! Here's the math using the writer's figures:
40,000,000 population
$1,000,000 per person
== $4e+13 ($40,000,000,000,000)

That's FORTY TRILLION DOLLARS, people. Do you have any idea how much money that actually is? The entire US national debt is around one-quarter of that figure. It's like suggesting that a person earning $40,000 per year should upgrade from their $110,000 home with payments they can afford into a half-million dollar home knowing that they cannot make enough money to pay for it.

If we tried to make an apples-to-apples comparison to make the math work with a ballpark figure of $1.5Tn like we're currently spending on the economic recovery, you do it this way.

$1,500,000,000 / 40,000,000 = $37,500 per person.

Good luck handing every American over 50 $37,500 and telling them to go retire on it. Hell, double it and try telling the average American to live on $75,000 TOTAL for the next twenty to forty years.

For perspective, the entire US national debt is around $11Tn today (actually around $6Tn once you figure in money held in trust, which is how we do it for our personal bank balances), and our entire going-into-severe-deficit-spending yearly budget is just shy of $3Tn. The interest alone at going treasury rates on such a stimulus plan would be nearly $500Bn per year. Assuming only the 40M retirees paid for this plan, and that they can earn a fabulous 10% APR by investing (HAR, HAR!) the $500K or so they have left after their spending spree, they'd be living right around the poverty line at $28,000 per year or so. If they made a more reasonable 5% per year, they are living on pretty close to zero dollars per year.

Guess we should all convert to Breatharianism then.

Stupid, stupid, stupid plan compounded by a poor understanding of large numbers. God help us if anybody tries to really push for such an idiotic, mathematically-implausible move.

Regards,
Matt B.

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I'm such a dope

I found the link to the original article since I was lame and tweeted it without checking the math.
http://www.tampabay.com/news/business/article973953.ece

I can only hope that the dude meant 4 million people over 50 in the workplace? But that seem awfully low.

Since this morning I have received back it again in email from my auntie... I'm such a dope. Thanks for clearing it up.

I think I was blinded by the ideology of giving people money to spend rather than a stimulus package to failing companies and government bureaucracy.

I personally think that a flat tax is a great idea but I honestly haven't done much research on it. What do you think?

matthew's picture

You're not an idiot...

You're not an idiot. I just have an extremely finely-tuned BS-O-Meter since I've been scammed by so many people in the past :)

Basically, the problem I see with such a "power to the people" approach is that it falls apart at any significant scale. These "huge" interventions of the Federal Government are, in fact, surgical in nature. We ARE the Federal Government, and the simple fact is that we don't have the money to hand millions of dollars to millions of our people.

What we can do is offer intervention into those industries which are borderline; allow some to fail, but try to salvage those which can be salvaged.

In that vein, I think the current choices are sane and make sense. As did similar choices by the Bush administration in their waning days in office. But the pundits on the right and the left have chosen to pursue identical arguments, with only the timing of who is in office to distinguish them from one another.

--
Matthew P. Barnson

--
Matthew P. Barnson

Sammy G's picture

I Don't See The Problem

What is the problem with me getting $1M? If Matt doesn't want his, I'll take $2M. Thanks.

daniel's picture

no deal

I have to buy an American car? As in, Big 3 (US-made Toyota's don't count)? Sammy, you can have 3 million.

After Obama's hyperinflation kicks in, and with a fleet of three GM cars, you'll be wishing you could get a job, guaranteed!

matthew's picture

Soviet Russia

In Soviet Russia, your job hyperinflates you!

--
Matthew P. Barnson

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Matthew P. Barnson