NPR and Innumeracy

This morning on the way to the airport for the last time this year, NPR had two Brits on trying to explain how to understand numbers, large numbers. One of their examples demonstrated why these kinds of issues are so important. The two have a show on the BBC purporting to put numbers in perspective. One stated, the total GDP of the US is about 15 trillion dollars, in that context a $700 billion TARP fund represents only about 5% of the total. The arithmetic is correct but the numbers are wrong. The tax base (that part of the GDP that we cede to government action is about 18%, or if you count our spending about 20% (about $3 trillion on a $15 trillion GDP base).

If you start from the tax base rather than the GDP the policy change in the share of GDP going to government increases by 5% but actually it is about a 30% increase in the percentage we offer up in taxes (or deficit spending). If you add in the $850 billion that the President Elect seems to be adding into the equation in short order we have increased the share of the government take from about 20% to about 30%. It is unlikely when those numbers are understood that most Americans would think the change was a minor one.