Is $100 million a lot of money?

I can’t imagine a million, even less a billion or a trillion.  When it comes to talking about money, just a few short years ago (or what seems like a few short years ago—30 years), I couldn’t even imagine $100,000 because you could buy a decent house for a lot less than that, and a house was the one thing in life that you would pay the biggest price for.

So when the press starts throwing around billions and trillions and hundreds of millions with respect to the US budget, my eyes start to glaze over with zeros.  In print, it always shows up with a number and the trillion (like $5 trillion) or billion (like $5 billion).  It’s the “5” that has meaning to me.  I can understand that.  The tag representing the number of zeroes following the number blur into meaningless big.

So how big is $100 million?  Well, when our current president said that he was going to cut that much out of the $3.5 trillion budget, a lot of people said, “Pooh Pah.”  In response, Robert Gibbs, the president’s press secretary, said that where he came from, $100 million was a lot of money.  I’m sure that he knew that a lot of people are like me and when the zeroes start to be tacked on to the simple numbers, everything is big.  “Yeah,” we are encouraged to say, “I’d like that much money—it’s a huge amount!”

So some of the press and some of the bloggers did some simple math and came out with percentages—like .007%, which is how big a $100 million cut is out of the $3.5 trillion budget.  That percentage really has no more meaning than a trillion or a billion to a lot of people.  The “7” is the number that sticks out, and it totally meaningless without the 4 zeroes that go with it (the 2 that you see, and the 2 represented by the %).  Even with the zeroes, it’s kind of fuzzy.

I like to look at it this way.  I like to cut the numbers down proportionately so that I get numbers that I understand, to get to the point where I can relate to them.  Is $100 a lot of money?  Yes, if I’m talking about going out to dinner alone or buying a Tshirt—it’s a LOT of money. No, if I’m thinking of buying a car—$100 is not a lot of money.

So, I’m going to pretend that I’m making out a budget to pay my mortgage, my utilities, my car payment, groceries, and taxes.  I’m going to take that US budget of $3.5 trillion ($3,500,000,000,000) and cut it down to $35,000 for my own budget.  I chose that number because I can get to it by simply throwing out 8 zeroes.

I can understand $35,000.  Most people in the US can relate to that number at some level.  It’s a two or three years of salary for some people, or part of a year’s salary for others.  It won’t buy much of a house except in fairly run down neighborhoods.  It’s way more than most people pay for a car.  I have a feel, though, for how big that number is.

Now, I’m going to pretend that I need to cut my budget.  I know that I’m going to have a pay cut, so I need to spend less.  I decide that I’m going to cut my $35,000 budget by the same amount as cutting $100 million ($100,000,000) out of $3.5 trillion budget.  After I figure that out, I’ll look for places to cut.  I envision where I can make my cuts:  Fewer boneless chicken breasts, more wings in the cooking pot; fewer trips for Sunday afternoon drives; one day a week no TV or computer to save on electricity.

I took high school math—to keep the numbers with the same proportion to each other, I have to throw 8 zeroes out of $100,000,000, the same as I did for the $3.5 trillion.  It’s like if I compare 1000 to 100, it’s the same as 10 to 1 because I just throw 2 zeros off of both numbers.

When I do this, how much do I cut out of my $35,000 budget?  Cutting $100 million out of $3.5 trillion is the same as cutting my $35,000 budget by a grand total of $1.  No zeros (unless you do cents), and very easy to understand.  So, instead of having $35,000 to spend on my living expenses, I would have $34,999.  Wow!  I just cut out less than the amount of a single Coca Cola for an entire year.

Is $1 a lot of money?  About as much as $100,000,000 when you’re talking US budget.

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Published in: on May 22, 2009 at 2:02 am  Leave a Comment  
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