It appears that President Bush and the U.S. Congress have agreed to cut taxes by $1.35 trillion over 10 years. But beyond the inside-the-beltway haggle over the specifics of the tax cut package, one question looms large: Just how much money is $1.35 trillion?
Let’s start a comparison. About six billion people live outside U.S. borders, of whom 1.3 billion-or about 20 percent of the world’s population-subsist on less than $1 a day, or $365 a year. The combined annual income of those 1.3 billion people thus comes to about $475 billion. In other words, the world’s poorest 1.3 billion people could survive on the U.S. tax cut for almost three years at their current subsistence levels.
Meanwhile, half of the world’s population, or three billion people, live on less than $2 per day, or about $730 per year. That figure includes the 1.3 billion people who live on less than $1 a day, which means some 1.7 billion people subsist on between $1 and $2 a day.
On average then, a typical person among the poorest 50 percent of the world population lives on less than $1.57 per day, or $573.05 per year.
How much is an income of $573 multiplied by 3 billion people? About $1.7 trillion-approximately the cumulative size of the 10-year tax cut President Bush had originally envisioned. Of course, the final compromise of $1.35 trillion is still enough for half of the world’s population to live on for a full nine months.
There are more stunning comparisons to be made. For example, the U.S. uses 19 million barrels of oil per day. At the current price of around $30 per barrel, the U.S. economy consumes $570 million worth of crude oil daily. That translates into $208 billion per year. In short, the Bush tax cut could pay America’s oil bill for the next six years.
Even from the point of view of the other members of the G8 club of industrialized countries, the U.S. tax cut represents an enormous sum. For starters, it’s larger than the GDP of any other member except Japan.
And what about Canada, our neighbor to the north? With its GDP of $700 billion, the country’s population would have to labor close to two years before it produced $1.35 trillion worth of goods and services. The other NAFTA partner of the U.S., Mexico, would need slightly more than two years to produce that much.
But enough with GDP, oil, and the world’s poor. Perhaps the best way to illustrate how much money this tax cut represents is to picture it as a stack of bills. That, however, might be hard. The U.S. Treasury prints approximately $142 billion of paper currency per year, both to supply the economy with new currency and to replace worn-out bills. To cover the amount of money envisaged in the Bush tax cut, the government would need to run its printing presses for more than nine years.
Likewise, Americans spend $110 billion on junk food each year and buy around $35 billion worth of lottery tickets annually. That adds up to $145 billion spent per year. At this rate, the Bush tax cut would support the country’s cheeseburger addiction, pay for all the country’s lotto fever for nine years, and still have some change left.
If you’re starting to doubt the need for a tax cut of this magnitude, consider the tax burden in the U.S. compared to other industrialized countries, say the G8. Among those, the U.S. pays the lowest share of its GDP in taxes, at just a little more than 30 percent. This compares with more than 45 percent for France and Germany. Even after the recent tax cuts in those countries, the income tax rate the average American faces remains much lower than in most other rich countries.
One might wonder, does the U.S. really need another huge tax cut?
The answer might well be no. After all, in poll after poll, Americans rank the tax cut as one of the least pressing issues facing the nation, instead considering education, healthcare, and economic progress the biggest priorities.
Yet this tax cut was an integral part of President Bush’s campaign platform, and he is unlikely to abandon it. He and his country, however, would be better served by a tax cut smaller in size-and more equitable in scope.
Stephan Richter (email@example.com) is publisher of TheGlobalist.com