Comparison Shopping

I used to teach with a man I’ll call Don (because that was his name). Don was an avid comparison shopper. One of his roles in his family was to do the weekly grocery shopping, using a list his wife Carol made for him. That’s cool – every couple has their deal. But Don was not just a regular shopper. In the days leading up to his Saturday morning grocery shopping trip, Don perused the ads and coupons in the newspaper and planned to buy the various items on the list at the stores where they were on sale. There were four grocery stores within errand-running distance of Don’s house: Food Lion, Harris Teeter, Kroger, and Wal-Mart. Each Saturday, Don planned his route, hitting all four grocery stores to get BOGO discounts on cans of soup, early bird bargains on day-old bread, or a special on blueberries. At the end of each trip, Don proudly totaled up the money he had saved; he used those savings to buy treats for himself during the week.

This was a harmless game. Don didn’t worry about the time he was spending in his quest for savings, and Carol was okay with Don’s occasional off-brand or close-enough choices.

Don and Carol probably didn’t spend more than 10% of their income on food; that’s a rough estimate for a couple in their income range. They probably spend 1/3 of their income on their mortgage and associated housing costs, and varying other amounts on medical care, transportation, utilities, and so forth. But Don loved the fact that he could save pennies at the grocery store, even though it didn’t amount to much in the grand scheme of things.

This is the mentality Elon Musk and his coterie of incels are taking in their effort to cut government spending. They are running around, shutting down small-scale programs to have bragging rights about making the government more efficient, while the large-scale programs where cost overruns are part of the price of doing business (I’m looking at you, Department of Defense) go untouched.

Economist Paul Krugman (Nobel-prize-winning economist and recently retired columnist for the New York Times) now writes a Substack, which I read regularly. In a recent essay, he described the United States as “an insurance company with an army.” I think that’s a useful way to understand the federal budget.

This chart summarizes the story. Social Security, Medicare, and Medicaid account for about 46% of the federal budget. These programs fall in the category of mandatory spending – the funds for these programs depend on a needs-based calculation by which anyone who qualifies for the program receives the benefits. Other mandatory spending (like non-medicare health care programs, federal employees and military retirement benefits, Supplementary Security income, veterans disability benefits, Deposit insurance, unemployment compensation, agricultural price and income support programs, and student loan programs) are not not funded by yearly appropriations. As you can see, defense spending accounts (considered discretionary, or controllable through the budget process) for 13% of the federal budget. The gold segment of the pie, non-defense discretionary spending, accounts for 16% of the federal budget. This includes everything else that the government does – including funding for small agencies like USAID, Musk’s target for last week.

Elon Musk is Don – he is running around, trying to pinch pennies from the small categories of spending, while leaving the largest part of discretionary spending (defense) unchallenged. He can’t cut the mandatory spending (I mean, not legally, although that doesn’t seem to bother anyone), and MAGA doesn’t want to cut defense. I mean, how are you going to protect the Gaza condo project?

The problem here is the conundrum of large numbers. People simply don’t think in terms of the units of measure associated with government spending. I used to run my high school students through a thought exercise.

• “How much bigger is a thousand than 100?”

• “Ten times”

• “Good. How much larger is a million than a thousand?”

• “Ten times.”

• “No, that would be 10,000. Try again.”

• “100 times.”

• “No, that would be 100,000. Try again.”

• “1,000 times.”

• “Correct. Now, how much bigger is a billion than a million?”

  • By this time, the smarter kids in the class have caught on.

• “1,000 times.”

• “Correct.”

We simply can’t think or talk intelligently about millions, billions, and trillions of dollars. I’ve heard people say things like “That program costs $100 million – or is it billion? – dollars.” That’s like an individual saying “I don’t remember whether I have one dollar or 1,000 dollars in my pocket.”

NPR did a story on this not too long ago. https://www.npr.org/2024/01/03/1198909057/brain-struggles-big-numbers-neuroscience

Now let’s talk about USAID. It was funded at approximately $28.3 billion last year. That’s a big number, right? I’ll certainly never see a billion dollars. I calculated one time that I might make $1 million over the course of my working life, all things considered. But $28.3 billion is .44% of the entire $6.4 trillion federal budget. A mere pittance. Public opinion polling tells us something interesting about this as well; on average, Americans often believe that 25% of the federal budget goes to foreign aid. I’d be against it too if we were spending that much! But we’re not.

All of this explains why Musk and the Muskrats (a good name for a 1980s band) can’t find ways to save $2 trillion in federal spending, as was promised in the campaign. About 2/3 of the budget – somewhere north of $4 trillion – is mandatory. Another 13% or so is defense spending, which the tech bros don’t plan to touch – I mean, Musk has defense contracts, right? Why would he cut them? They couldn’t reach the $2 trillion goal even if they cut every other part of the budget to nothing.

They know that. The budget people in Congress know that. But Musk and his boyos want us to think that they are serious and skilled budgeters because they got a BOGO deal on canned Cream of Mushroom soup at Kroger.