Exactly where does all the money go?

Numbers being tossed at us by Wall Street, force-fed to the federal government and argued over in state budgets are so far beyond our understanding that they have little meaning to most of us anymore.

If I said $1 million to you, you might have some idea how big that number is. Maybe you will think it is three times the value of your house or apartment.

If I said $1 billion, can you really imagine 3,000 homes? What would that look like in your imagination? Then can you see $1 billion being the size of a small town?

Now what if I say $1 trillion? Can you see 3 million or 4 million homes? Can you picture these homes filling an area, for example, as large as San Francisco?

That’s the problem with inflation; we really have no idea what money numbers mean any more. And when the news tells us our state budget is in the billions, can we really understand what that size of money represents?

How about the bailout money Bush gave to the purveyors of silly numbers on Wall Street? Do you really understand what that could buy or does it merely seem like a really big, unfathomable number? How about the stimulus money? What can, what could, it buy?

u      u      u

So, let’s look at what governments have used money for in the past and what it means in today’s values. We’re going to look at some really large sums. Let’s start with Eisenhower.

Eisenhower announced that he was going to increase spending taxpayers’ money on a brand new, expanded interstate road system. His stimulus reasons for doing so and the political storm that ensued are not the point here. Right or wrong, on top of considerable funds already allocated to new highways since Roosevelt, he spent an additional $25 million a year for fiscal years (FY) 1954 and 1955. But in 1954, after a dramatic speech, he forced through legislation that authorized an additional $175 million annually for FY 1956 and 1957.

Seems like a pittance in today’s numbers, doesn’t it? Well, then it was huge. Considering that the median home price was $10,250 in 1954, this meant that he was spending the equivalent of 17,073 homes a year for two years (1956 and 1957) on top of the 2,500 homes a year he spent in 1954 and 1955. So, Eisenhower committed stimulus public funds for four years that amounted to more than 39,000 homes.

However, today’s median home costs $208,600, so his four-year stimulus highway budget was a little over $8 billion in today’s money.

See? When you compare apples to apples (homes price to home price), the silly numbers we hear about today begin to make sense, or at least are understandable.

u      u      u

If you really want crazy numbers, take the nuclear armament and delivery question, as part of the defense budget. It amounts, for the years 1962 to 1982, to about $14 trillion dollars in today’s money or about 67 million homes (think all of New York state).

On the other hand, let’s look at just one part of the $275 billion public works current stimulus. Taking the road improvement part separately, this represents $28 billion, or currently about 134,000 homes. That’s about three-and-a-half times what Eisenhower spent (in equivalent home cost).

Why does it cost so much to improve, as the president announced, “only 150,000 miles of our roads?� That represents only 4 percent of all the roads we already have or, if you want to measure federal roads, about 15 percent of current highways.

Well, for a start, Eisenhower only built 42,000 miles of federal highways. Back then, that was thinking big. Now we’re so choked with roads any serious improvement has to deal with 3,750,000 miles of roads in America. We’ve created a roadway nightmare we may never be able to afford to maintain.

u      u      u

Back in the ’50s, Eisenhower had higher tax rates to benefit from. The low rate was 20 percent and the top rate was 87 percent. Compare that to today’s 10 percent going up to 36 percent.

And, in our comparison to back then, houses were more affordable in 1954 when compared with earning capacity. The average wage in 1954 was $3,155 (about a third of the average house price). Compare that to today’s average wage of $40,700 (about a fifth of the average house price, inflated as a business for banking).

The other reason it may have been cheaper to undertake public works in Eisenhower’s day was because, back then, corporations were satisfied with 3 percent to 8 percent gross profits on average. Today, Wall Street demands 8 percent to 20 percent gross profit margins from corporations.

When fulfilling government contracts, contracters have the sharp pencil boys of Wall Street keeping tabs; the very purveyors of silly numbers based on greed are the same bunch whose ethics always seem to jam affordable progress in America.

Peter Riva, formerly of Amenia Union, lives in New Mexico.