Fun With Really Big Numbers: We Can Totally Afford to End Extreme Poverty in the United States

bloombergToday I was listening to Mike Pesca on Slate's The Gist podcast, and he had an interesting riff on Michael Bloomberg. Apparently Bloomberg recently received a prize for a million dollars and was kind enough to give it back to fund ten more prizes for $100,000 a piece for other do-gooders. Nice, right? But here's what Pesca figured out: For Michael Bloomberg's, one million dollars is .003058% of his wealth. Pesca points out that, for a millionaire, a prize of equivalent size would be $30.58. I did a rough calculation to figure out what this equivalent prize would be to me. Michael Bloomberg getting one million dollars is roughly like me getting $1.38 cents added to my annual pre-tax pay. Obviously I'm not a millionaire. But this got me thinking. Specifically, it got me thinking about a point Matthew Yglesias has repeatedly made over in Slate's Moneybox column. Yglesias is persuaded, and has persuaded me, that direct cash payments to poor people are actually the most effective way to confront poverty. It turns out that if we stop condescending to poor people and blaming them for their misery, and actually trust them to make rational decisions about how to improve their lot in life, they make better ones than the people who think they are incapable.

So, just how much money could someone like Michael Bloomberg give to poor people? Here's what I've come up with. [Note: I'm no math whiz, so if I've done any of this incorrectly, please let me know.]

Let's say we only focused our poverty-fighting in the U.S. I know that's jingoistic and also inefficient since a dollar goes a lot further towards fighting poverty in a much poorer country. But it's easy to relate to our fellow citizens, and you'll see at the end why this gets really interesting.

So, there are 313.9 million people living in the United States, according to Google (which probably knows better than anyone, including the government).

Now, a billion is a huge number. It's difficult to wrap your mind around. Imagine a briefcase with a thousand dollars in it. Not too hard to picture, right? Now imagine a thousand of those spread out on a football field or a mall parking lot. Already getting hard to picture, right? Now imagine stacking 999 more briefcases on top of each of those. That's a lot of cash.

It gets easier when you think about how much that is for each of us. If you divided that cash in that parking lot up among all the people in the country, it's $3.19 for each person. That's not just every working adult. That's every baby, every geriatric great-grandma. Everybody. But it's only $3.19.

Big deal, right?

But what if Michael Bloomberg decided to spend only half his wealth by giving it directly to everyone (not counting the cost of postage)? We have to leave him with some money of his own, right? So just half his wealth.

That's $60.85.

All of it?warren buffett

$121.65 per American.

Still not that big a deal, right?

But what about Warren Buffet? Half his wealth would translate to

$103.53 per American.

$207.07 if he gave all his wealth to individual Americans.

What about Bill Gates?

$123.45 per American.

Bill Gates (L), US Philanthropist and foAll his wealth?

$246.90.

But why would Bill Gates cut a check for $246.90 to Warren Buffet? If a million dollar prize is Michael Bloomberg's version of Ben Gorman's $1.38, Bill Gates' check to warren Buffet would just be an insult. It wouldn't be worth paying his secretary to cash it.

So, instead, what if Bill Gates gave all his wealth to only the poorest 1% of Americans?

That would be $24,690.

I can't quite figure out how poor the bottom 1% even are, because if you look at households that make less than $5000 a year, that's 3.52% of all American households. I am trying to imagine what the bottom third of those households get by on in a year, and I just can't do it.

Can you imagine what $24,690 dollars would mean to a family currently living on less than $5000 dollars a year?

And just imagine the stimulative effect on the economy. Those people wouldn't set that money aside for a rainy day. They would immediately spend it on things to improve their desperate circumstances, and that's not to say they would be frivolous with it. They'd buy a car so they could get to a job interview. They'd but a computer so they could write a resume and search for a job. They'd get some much-needed healthcare that isn't covered by Medicaid, something like braces for their kids.

All that money from that one super-poor individual, compounded by over 3 million people spending it all at once would mean a lot of people who make cars and computers and put braces on people's teeth would suddenly have more to spend. Hell, Bill Gates might see such a windfall on his Microsoft stock from all the Windows computers and Windows phones that he'd make a strong comeback that year.

But that's the problem. It would only be that year.

Only once.

But let's consider another alternative.

bar-chart-defense-spendingU.S. military spending was $683.7 billion back in 2011. Let's just use that number, even though it's gone up since then. This number does not include Homeland Security, the money we spend on securing our power stations, the amount we spend on FBI, state troopers, or local police. This is just the U.S. Armed Forces.

$683.7 billion. 683.7 of those parking lots full of a thousand stacks of a thousand cash-filled suitcases.

That’s $2178.08 per American.

Only a tenth of the US Military budget would generate $217.80 for every American.

But we have to have some military defense, right? Well, what if we only cut down our ability to defend ourselves from our enemies (Who? North Korea?) to 90% of our current capacity?

Then, what if we kicked that 10% to the poorest 1% of Americans?

Only a tenth of that would give $21,780.80 for the poorest 1%.

Every year!

Homeless FamilyNow, I'm not saying we should fight poverty in this blunt way. Welfare critics believe that cash payments create a perverse incentive not to work, and I think, in this case, that would certainly happen. If someone making $1000 dollars a year gets an annual check for $21,780, who would want to get $2000? But even if you curved it to incentivize work and focused the money and children, the disabled, and a boost to Social Security (which should be means-tested and uncapped anyway, because Warren Buffet does not need his Social Security check, and he can certainly afford to pay just as high a percentage of his income into the system as you and I do), we could end extreme poverty in the U.S. (people living on less than $2 a day) and, by my estimation, double the buying power of everyone living under the federal poverty line.

Now, I know there are some people who will cry, "Socialism!" or even "Communism!" Some of these people simply don't know what those terms mean. Others do but only like their redistribution to go one way, through tax cuts to the wealthiest among us.

To the first group, I'd say, "You are currently looking at a computer screen giving you information through a system developed through government investment called the Internet. That's a form of socialism. Now use the Internet to find out what 'Socialism' and 'Communism' really mean." To the latter group, I'd say, "Suck it, plutocrats. Some of us don't believe liberty necessitates the abject misery of our fellow citizens.This wouldn't raise or lower your taxes by a single penny either way. And it doesn't even take money away from the ultra-rich. So pull your copy of The Fountainhead out of your butt."

I'm not saying we need to cut military spending by 10%. Or 5%. Or 15%. And I'm not saying anybody needs to get a check for 21 grand. Or even a briefcase with one grand in it. I'm saying that Micheal Bloomberg and Warren Buffet and Bill Gates, even with all their wealth, are incapable of ending extreme poverty in this country. They simply can't do it.

But we can. We can afford it. Easily.