Putting the Cost of the Pandemic into Perspective

In the US, household net worth is $118.4 trillion (and our annual GDP is $21.4 trillion).

If your net worth was $118,000 - let's say you had $68,000 in home equity and $50,000 in stocks and savings - would you dip into it for $2,000 to $10,000 (or take out loans of $2k to $10k) to cover sudden, serious medical expenses? 

Would you consider yourself destitute if you had to?

Estimates vary, but the coronavirus will cost us at least $2 trillion - perhaps more than $5 trillion. It's worth remembering that we have $118 trillion (and the credit score to borrow trillions more).

Real GDP Growth by Decades

GDP Growth Under Last Four Presidents (Or What Trump Lied About This Time)

This morning the new GDP numbers were announced here. The numbers compare the second quarter of 2019 with the second quarter of 2018.

GDP is up 2.1% for 2Q 2019
Personal consumption is up 4.3%
Private domestic investment is down 5.5%
Exports are down 5.1%
Federal government spending is up 7.9%

So what does this mean in simple English?
GDP growth was below average. Since 1993, quarterly growth has averaged 2.6%. Hitting 2.1% rather than 2.6% is a difference of $100 billion. ($107 billion, to be exact. Which works out to about $300 per American.)  GDP rose because personal consumption and government spending is up and in spite of the fact that exports and investment are down.

It's dicey to play psychologist based on one quarter but this suggests that the great job market, long boom and easy credit have made American consumers more comfortable buying stuff. So personal consumption is up.

Meanwhile, Trump's constant trade war talk has made businesses nervous about investing more and has already hurt their ability to sell to foreign markets. So business investment and exports are down.

Households are comfortable and businesses are nervous. It's tough to sustain increases in household and government spending when investment and exports are dropping.

There is another element worth noting. I've heard from more than one Trump supporter that GDP growth under Trump has been unprecedented and that he's hit quarterly growth levels that Obama thought impossible. Like so many of the claims originating from the fake president, this is an absurd claim that quickly dissolves on contact with facts. 

This graph shows quarterly GDP growth for the last four presidents. Specifically, it shows the average for each one (blue bar), their highest quarter (orange), their lowest quarter (gray) and the difference between the average of their first three quarters (the economy they inherited) and the average of their last three quarters (the economy they left for the next president) (yellow). 

Studying this graph quickly makes a few things obvious. 

Trump has the lowest high. In his best quarter, GDP grew by 3.2% from a year earlier. For Clinton, Bush, and Obama, the highs were 5.3%, 4.3%, and 4.0%. GDP is not growing at unprecedented highs under Trump. It is not even growing at precedented highs. Clinton, Bush, and Obama all had better quarters. (Clinton alone enjoyed 24 quarters of better GDP growth than Trump's best quarter. 24.)

Bush inherited a great economy and made it worse, GDP growth dropping by 2.8 percentage points from what it was in his first three quarters to what it was in his last three quarters. Obama inherited an awful economy and made it better, GDP growth increasing by 5.1 percentage points. Clinton inherited a decent economy and made it great, increasing GDP growth by 1.3 percentage point. Trump? Trump hasn't really changed things. He inherited a good economy and made it somewhat better, an uptick of 0.3 percentage points from his first few quarters to his most recent three. It is fascinating that so many of his critics who thought he would blow up the economy (in a disastrous way, as I did) and so many of his supporters who thought he would blow up the economy (in a great way), have found themselves in the calm before a clear direction. For the most part, the economy has continued on the same trajectory in which he found it.

Of course none of this is what he promised.

Trump promised GDP growth of 4, 5 or 6% after he passed his tax cut. (Video here.) He's currently averaging 2.6%, about two-thirds of what the economy averaged under Clinton and less than half of what he promised. It's not just that his tax bill has doubled the deficit; it has failed to make any discernible change in GDP growth.

If he just shut up, the economy might do better. Businesses might invest more and find it easier to sell abroad without dodging the tariffs of Trump's trade wars. Of course expecting Trump to shut up is like expecting the heads on Mount Rushmore to speak out. 

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Catherine Rampell puts the surge in government spending into perspective.

We're Getting Older, Fewer are Working and GDP Growth is Slowing: Next Decade's Economy in 4 Simple Graphs

In October, the Bureau of Labor Statistics released a report forecasting some key numbers for the next decade. You can find it here.

Here in simple graphs is the story it tells. The punchline is that the U.S. is getting old and GDP growth is slowing.

First, population growth will slow. Babies and immigrants will be coming into the country at a slower rate.

As population growth slows, the population will get older. The percentage of the workforce 55 and older will continue to rise.

People 55 and older are less likely to work than people 25 to 55. So, as the population becomes older, labor force participation rate drops.

Finally, the BLS is projecting increases in productivity. That partly offsets a drop in population growth. Nonetheless, given a smaller portion of Americans will be working, GDP growth will be up higher than last decade (a period that included the devastating Great Recession) but lower than the decade before that (and what it was most of last century).

Demographics is destiny. Baby boomers were at their peak working years 1996 to 2006 and thanks to babies and immigrants (and the babies of immigrants) population growth was robust. Over the next decade that changes and with it will come a change in economic growth.

Red State, Blue State, Old Jobs, New Jobs

Edward Glaeser's Triumph of the City [2011], opens with some statistics that illustrate the remarkable contrast between big city productivity and smaller city or even rural productivity.

About half the US population "crowd together in the 3 percent of the country that is urban." "Workers in metropolitan areas with big cities earn 30 percent more than workers who aren't in metropolitan areas." And the bigger the city, the more this effect is exaggerated. "Americans who live in metropolitan areas with more than a million residents are, on average, more than 50 percent more productive than Americans who live in smaller metropolitan areas. These relationships are the same even when we take into account the education, experience, and industry of workers. They're even the same if we take individual workers' IQs into account." {emphasis added]
"On average, as the share of a country's population that is urban rises by 10 percent, the country's per capita output increases by 30 percent. Per capita incomes are almost four times higher in those countries where a majority of people in cities than in those countries where a majority of people live in rural areas."

GDP is measured by exchange. Big networks make it easier for people to easily exchange goods, services, and ideas. If you live in a rural area, two miles from your nearest neighbor, it is much harder to exchange anything than it is if you live in a densely populated area where a million neighbors are within a mile. Bit city networks are rich and complex; rural networks are sparse.

City of the Future, Lev Rudnev, 1927

There is so much to this but one comes from openness to innovation. Cities are like diversified portfolios. If you own 50 different stocks, you just accept that one (or two or four or ten) will shrink in value as markets shift; your entire portfolio may well do better in disruptive, tumultuous markets because the one (or two or four or ten) stocks that thrive through this change could create wealth that is worth multiples of what you lost in the bad stocks. The investor who owns one or two stocks sees big change as a threat because if one or two of her stocks collapse in value, the whole portfolio does. There is so much going on in a city that its people can more easily adapt to innovation and disruption. You get laid off from one failed startup and you go to work at another. In a rural area, if you get laid off from a company you may literally need to move out of state. And as a people become more open to innovation and disruption, they create more value over time than people who try to conserve what they have and protect themselves from change.

As an economic model, cities just work better than rural areas. To the extent that the country moves in the direction of what works best for rural areas, it will generally move in the wrong direction for economic progress.

Magic Math in Trump's Budget: How an Imaginary $2 Trillion Gets Spent Twice

Trump's new budget plan forecast $2 trillion in additional revenues because of economic growth and then simultaneously applied that $2 trillion to a tax cut and to a deficit reduction. This faster economic growth will both increase revenues in the form of higher taxes and fund a tax cut in the form of lower taxes. Wrap your mind around that.  It is as if Trump's Budget Direct Mick Mulvaney (people say he's Irish but it seems clear that he's a goblin) said, "The amount we get in extra taxes will pay down the deficit AND will let us cut taxes by that same amount." It's like someone has won $100,000 in the lottery and excitedly announces their plan to pay down their $100,000 in debt and spend $100,000 on new cars and travel. It's double counting.

It might be that the Trump administration is that sloppy. Or it might be that they trust that they have so undermined the credibility of the press by continually calling it fake news that they will be able to ignore or brush off any reporting that points this out. They are operating in a fact free zone.

If that's not enough, there is more. Where does this extra $2 trillion over 10 years come from? It's existence comes from an assumption that the economy will grow by 3% a year for a decade. How likely is that?

Well, since 1948, the longest stretch during which GDP growth exceeded 3% was 6 years. (From 1961 to 1966, when Johnson's New Deal was increasing government spending, defense spending for Vietnam was just ramping up, and the baby boomers were starting school and driving their parents to buy more housing, clothes, and cars.) It has been eleven years since GDP growth has been as high as 3% (exactly 3% in 2005, and 3.1% the year before that.) In this century - since 2000 - GDP growth has not even averaged 2%, much less 3%.

So is there reason to believe that economic growth will bump up 50%? (3% is 50% more than 2%.)

Curiously, per capita GDP growth has been incredibly stable since after the Civil War. Here it is by decade. (Source data here.)

Note that in only one decade has per capita GDP growth been more than 3%; in the 1940s, when the US was spending a huge amount of money first fighting Nazis and then rebuilding Europe and Japan, per person GDP growth was nearly 4%. World War 2 was the catalyst. Pull out that decade and you can see that per capita GDP growth has never averaged 3% for a decade. 

And here is a phenomenal statistic. Pull out the 1940s and the average per capita GDP growth since the 1870s has been 1.88%. The average GDP growth in this century? 1.88%.

GDP growth bounces over 3% in healthy and normal decades but it does not stay much above 2% for any length of time without a growth in the workforce. A growth in the workforce depends on immigration and birth rate.

So, will GDP bounce up to 3% for a decade? Only if Donald decides to encourage immigration. (Insert laughter here.) Millennials will cause a growth in the workforce during this next decade to offset baby boomer retirements but it won't be enough to cause a noticeable surge. 

Trump's budget plan doesn't just use the same $2 trillion to simultaneously pay down debt and cut taxes. It forecasts this additional $2 trillion by assuming GDP growth we've only experienced in one out of the last fourteen decades. It's not just that he and Mulvaney are spending this money twice; it's imaginary money.

83% of what Trump says ranges from half-true to pants on fire. Only 17% of what he says is mostly true or simply true. It's little wonder that with such disregard for facts he would put out a plan that shows such utter disregard for simple arithmetic or reasonable assumptions. He continues to show his contempt for Americans' ability to reason. So far, assuming that we're all stupid has worked out well for him. It doesn't seem like it'll work out as well for the rest of us.

GDP Grew 4.6% in 2nd Quarter (Politicians and Media, Committed to Bad News, Look the Other Way)

The final estimate is that the GDP grew by 4.6% in the 2nd Quarter of this year, according to today's report from the Department of Commerce.

Consumer spending on durable goods (things like cars and refrigerators) and business investment were up 14.1% and 9.7%. Consumers spending more on purchases that could be deferred demonstrates that they are feeling more confident about the economy, as does businesses spending more to invest in the future.

It's not just the best quarter since 2011. It matches the best quarter since before 2007.

But you won't hear much about it. Not on the news, not from politicians. It is in no one's interest to present positive news. A reporter on Bloomberg said, "There's no reason to look at GDP growth today." Other news outlets, apparently agreeing, simply failed to mention it in their top of the hour reports.

The Obama administration is still pushing for programs that would create more jobs and raise median income. To say that things are going great makes it harder to argue for those programs.

The Republicans move blithely from one irrelevant and bone-headed argument to the next, whether it's invading the Middle East or paying for two wars with a tax cut or screaming about how huge deficits during the Great Recession are going to blow up the economy or how Obamacare is going to create huge deficits and blow up the economy.They repeatedly show themselves completely tone deaf on policy and - sadly - in tune on politics, managing to win the attention of media and voters without ever actually being right about anything of substance.

Liberals think it's awful that the GDP is growing because corporate profits are going up and it is only the rich who are getting richer. So for them, the economy actually sucks and numbers to the contrary are misleading. Misery still exists and they'll focus on it. Liberals fail to see the humor in Woody Allen's quip, "I can't enjoy a meal as long as I know that someone, somewhere is starving."

Conservatives think it's awful that the GDP is growing because it suggests that Obama's and the Fed's policies might actually be sensible rather than disastrous. Today's most influential conservatives are ideologues who think that pragmatism is the worst kind of betrayal and wouldn't admit that government policies could have any positive impact even if the fastest growing economy of the last quarter century was communist.

The media think it's best to ignore mention that the GDP is growing robustly because it undercuts an incredibly lucrative narrative that brings up ratings. Whether they're trying to get ratings from liberals outraged at how only the 1% are benefiting from this recovery or from conservatives who are clinging tightly to their belief that the world is getting worse and has been since Adam and Eve's expulsion from the garden, and that any proof to the contrary is either fabricated or fleeting. Bad news is good news for news outlets. People stay tuned for news about hurricanes, not 70 degree weather.

It's an odd time. Never has technology and business innovation offered more potential and yet rarely have people been so gloomy about the future. If a huge swath of us get wiped out by Ebola, we'll look back chagrined at what petty things we whined about. If - as I think - we'll hit an inflection point that makes us more prosperous and privileged than any previous generation has dreamed about, then we'll look back chagrined at how incredibly pessimistic we were at the dawn of this change. In either case, the committed pessimism strikes me as absurd and increasingly takes a commitment to denial that hopefully fewer and fewer people will be able to muster.

Hard Numbers Up and Soft Numbers Down - Americans Don't Feel So Good About Their Improving Economy

There has been some good economic news of late. And yet, Americans still don't have much confidence in the economy. This week we got some great economic numbers, many the best since the late 1990s. The market's response? The S&P finished down 2.7%, its biggest drop since June 2012. Nobody said this was going to be easy.

Yesterday we learned that GDP grew more than expected in the 2nd Quarter, hitting 4% for only the third time in more than 7 years.

New unemployment claims have dropped to their lowest point since 2008. As demand for employees begins to rise, so are wages. The "employment cost index" in the last quarter rose by the most since 2008.

 Based on performance through the first half of the year, the American economy is on track to create the most jobs since 1999. 

And yet, since yesterday's GDP announcement, the Dow has been down. Gallup's gauge of economic confidence dropped the most since last October's government shutdown. 35% of Americans said the economy is getting better but 60% said it is getting worse. 

If you look at this weekly table for Gallup, you see that all the "hard" data, folks who report being underemployed, or layoffs vs. hiring at their place of work, and how much they've spent - is going up. It's in the green. All the "soft" data, folks reporting on their optimism or how they feel about conditions, is going down. It's in the red. Just in the last week, there's been a rise of 4% in the number of Americans who think the economy is doing worse. This in spite of the data suggesting otherwise.

I'm not sure if the country has a psychologist able to explain this. So far, Gallup's confidence index has been a terrible predictor but it's probably a pretty good gauge of how people feel about what's going on. In the last week, with Russian backed separatists shooting down a commercial airline, Israelis and Palestinians lobbing missiles into each other's neighborhoods, an Ebola breakout in Africa, and the House - again intent on proving their commitment to irrelevant topics - voting to sue Obama, there has been an abundance of "make you feel bad news." Maybe the confidence index could be replaced with a more aptly named, "How ya' feelin'?" index.

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Post-script. I was focused on Gallup's number. The consumer confidence index actually is up to a 7 year high, as befits the "hard" economic numbers.

All This Growth And We're Still Short by 7 Million Jobs

If Haiti had GDP growth of 10% for five years, it would be reason for great optimism. Still, you probably wouldn't want to leave Palo Alto for Port-au-Prince. Improved is not the same as realizing your potential.

I remain optimistic about the future and am happy about the fact that we've had job growth for 44 months in a row. Still, this has been a slow recovery from a deep hole. We have yet to realize our potential.

Pew recently published this graph showing how far off of the steady incline we have fallen: we are 7 million jobs short.

The good news is that we have finally regained the jobs lost during the Great Recession. The bad news is that we've missed out on years of normal growth. There are about 15 million more working age people since the start of the recession, roughly half of whom would normally go into the job market. Had the economy been "normal" during that time, we'd have created another 7 million jobs.

Recovery 1.0 restored the lost jobs. Finally, that box is checked.
Recovery 2.0 will restore the 7 million jobs never created. Once that box is checked it will feel like a real recovery.

Households, Government and Businesses Are In Position for a New Boom

The economy is in the best position it's been for all of this century.

Households have paid down debt and increased wealth, now positioned to comfortably begin spending again. That will show up as additional tax revenues for governments and additional sales for businesses.

The government has brought spending and taxes back within the normal range. This doesn't just mean a lower deficit. It also means that the government no longer has to drag the economy down through austerity measures that raise taxes and lower spending.

As households and governments return to business as normal, businesses will boom as well, which will feed back to the other two sectors.

The Government Has Recovered

The deficit has come down one trillion dollars in four years. This deficit reduction during  the recovery has taken 1% out of GDP growth during that time through higher taxes and lower spending, but that drag is likely to stop. Remarkably, we've gone from record deficit to normal within just five years.

In the graph to the left you can see two straight lines representing the average tax revenue as a percentage of GDP (the lower of the two lines) and the average federal spending as a percentage of GDP (the higher).

The line that raises above the band shows actual spending. The line below the band shows actual tax revenues. In 2009, they were both at their most extreme, taxes at 14.6% of GDP and spending at 24.4%.

Since then, austerity measures and the recovery have changed  this. At 17.6% of GDP, taxes this year are projected to run just above the average of 17.4%. At 20.4%, government spending will be just below the average of 20.5%. And reports so far this year suggest the deficit will be even lower than this projection.

Government spending will - at a minimum - now be a stabilizing force on the economy rather than a drag on expansion as it has been throughout this long recovery. Government austerity is one reason it took 6.5 years for the economy to create the jobs lost during the Great Recession. (The other, of course, being simply the massive number of jobs lost during this financial crisis, as can be seen in the graph below.)

Households Have Recovered

Last month the economy hit a milestone: total employment hit a new high, finally restoring all the jobs lost during the Great Recession. This is a big deal for so many reasons. Just as the government has finally brought taxes and spending to within normal bounds, this means that households are finally returning to something like normal as well.

For the first time since 2000, the economy created more than 200,000 jobs per month for four months in a row. These sorts of realities change how people feel about spending. Even people who have kept their jobs have been more cautious about spending or taking out loans when the economy was so bad. The improving labor market helps them to begin feeling more confident about spending. And households are, by some measures, in their best position to begin spending in a generation.

Last year household wealth rose by $10 trillion, finally restoring all the wealth lost during the Great Recession. The stock market is regularly hitting new highs. Home prices are up 20% in the last two years.  While assets have been appreciating, households have also been paying down debt. What households pay to service debt is the lowest it has been since the Fed began to track this in 1980, a generation ago. All of this suggests that households will begin to spend again and that is good news for everyone - from businesses to government to other households.

Businesses, Households, and Government Are Now Positioned to Boom

So imagine this combination.
Households feel emboldened by additional wealth and a healthier jobs market to spend again.
Government spending will begin to grow at normal rates again.
Businesses - facing increased spending from households and government - will begin to invest and expand.
The combination of household spending and business expansion will provide more tax revenues, allowing the government to spend more and to pay down more debt, putting more capital into financial markets.
The combination of household spending and government spending will mean more business for business, allowing them to hire more and pay out more to shareholders.
The combination of government spending and business expansion will provide more jobs and income to households.

For the first time this century, we will enjoy an economy in which all the pieces - government, households, and business - are moving towards full capacity without resorting to excessive debt.

It's been a long time.

And it could result in a boom that will be even more impressive than the ones we had in the 1980s and 1990s.

P.S. 10 June, I would add this graph of the ratio of unemployed workers per job opening from 538.

This shows that there are fewer workers competing for the same jobs, which is great news for job-seekers. That ratio is nearly back to pre-recession levels. Once it hits that level, I predict wages will again start to climb.

Measuring the Future as Well as the Past - Adding Entrepreneurial Activity to Measures of GDP and Unemployment

In the wake of the Great Depression, the US began to measure GDP. Simon Kuznets, in 1937, presented his formulation of gross domestic product to the U.S. Congress for the first time. As obvious and as simple as it sounds, if economic growth mattered and was going to be a goal of economic policy, it had to be measured.

In the 50 years after GDP was defined, GDP grew about 50% faster than it had in the 50 years before. Management 101 is "measure what matters."

Which brings us to entrepreneurship, for which no simple equivalent to GDP exists. Making the rash assumption that it matters, it seems worthy of a Simon Kuznets for the 21st century, someone to create a measure that would - in a single value - capture the rise and fall in entrepreneurial initiatives.

The Global Entrepreneurship Monitor (GEM) offers a candidate for this measure. The good and the bad of their data set is that it is rich. You can compare Total Early Stage Entrepreneurial Activity across countries, investment rates, growth expectations, etc. This is a delightful database for serious students. It is less helpful for a simple report akin to "GDP rose from 2.3% to 3.3% this year." 

The OECD has developed International Metrics for Entrepreneurship (with financial aid - and presumably advice - from the Kauffman Foundation) that allow comparisons across countries and also guide in policy formulation. (Note how much better the UK's recovery has been than the US recovery in this regards.)

Stock market investors look for leading indicators, measures that predict what will happen to stock prices. (Weather prediction that would then influence crop yields was one of the original leading indicators.) That matters. But what matters more to a community are measures of activities that will create - rather than just predict - future prosperity. In this regards, it is hard to think of a more important measure than entrepreneurial activity.

Curiously, in Obama's annual report, entrepreneur ( or entrepreneurs or entrepreneurship) is mentioned only 6 times in 410 pages. By contrast, the UK has done more than merely make mention of entrepreneurship. In November of last year, the UK announced its 10,000th startup loan. It doesn't seem like an accident that the UK's rate of new enterprises is up 40% since before the recession while the US's rate has yet to fully recover. The UK is laying policies for future economic growth that are already showing up in increased rates of business formation. Look for the UK's future GDP growth to outpace that of the US for this reason alone. 

Every good manager and policy maker knows that intentionality precedes results. Managers who want high performance don't just shrug and tell their teams, "Whatever." On a similar note, policy makers intent on creating economic growth are intentional about everything from infrastructure investments to tax policies to education and permits. Entrepreneurship is as likely to respond to government initiatives as is education. And one of the simplest way to communicate what matters is to begin talking about what desired results look like. For this, a measure can be a good thing.

As it is, the awareness of the rate of new business formation is paltry in comparison to awareness to the unemployment rate; and yet it is the first that will do the most to change the second. Unemployment rate is not a cause. It is an effect.

If you want to measure past economic performance, measure GDP and unemployment. If you want to measure future economic performance, measure entrepreneurship. That's reasons enough to standardize and publish easy metrics to explain our entrepreneurial performance.

Productivity Matters (Debt Not so Much)

Compared to 1945, today's

GDP is 65X larger
consumer debt is 444X larger
the value of mutual funds is 12,400X higher

GDP measures income and the mutual funds are one proxy for wealth, perhaps the simplest measure of the middle class's involvement in stock and bond markets.

A great deal is made of how much debt we have. Debt still seems to suggest opprobrium of some kind, but it is an instrumental part of a financially sophisticated society. Would the world really be better if no one purchased a house until they had saved the full amount to buy it outright, or if no one pursued higher education until they could do it without a loan or didn't take that beach vacation until they were in their 70s? Debt enables options and the modern access to credit means that the person going into debt needn't explain his or her reasons to anyone: only convince someone they can repay the loan.

Keep your eye on productivity instead. If we produce more, we can have more, whether it comes in the form of profits or salary or taxes and is taken now in consumption or saved for later as investment. With that in mind,

"The US Department of Labor reported that non-farm productivity grew at an annual rate of 6.6% in the second quarter, higher than economists expected," at the highest rate since 2003.

Might we be laying the foundation for real progress? Or would such a prediction sound so pollyanna-ish as to get my blogger's license revoked?

Why the Bailouts Don't Seem to Be Calming Markets

The value of financial derivatives is about $500 trillion.
Global GDP is about $70 trillion.
The U.S. Economy is about $13 trillion.
The U.S. Federal Budget is about $3 trillion.

Is it any wonder that markets seem to doubt the U.S. government's ability to actually stem the tide of financial crisis? The whole of our government's budget is not enough to cover a movement of even a few percent in global financial markets.

During this age of globalization, when financial markets around the world are increasingly interconnected, we should have been moving towards global regulatory mechanisms, replicating the success of Keynesian policies within national economies. Instead, conservatives have been busily deregulating even within national economies.

Virtual Budgets - A Proposal for 2008 Presidential Candidates

This is the second in a series of proposals I'd like to hear from presidential candidates.

Today, George W. sent Congress his latest budget proposal, nearly $3 trillion for federal spending.

One subset of his budget is the defense spending - a tidy $717 billion. According to The World Bank listing of 183 counties, ranked by GDP, http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf
a country with a GDP of $717 billion would have ranked 15th globally - just between Russia and Australia. $717 billion is twice the size of Sweden or Saudi Arabia's entire GDP! Put another way, it is nearly 3X the total GDP of the Axis of Evil combined. (That's Iraq, Iran, and North Korea. We could lease those countries for one third of what it takes to defend ourselves from them.)

So, with that bit of rant behind me, let me propose this. When Americans file their taxes each year, they indicate where they would like to see their money spent. What percentage to housing, to basic research, to health insurance, to defense, to education, etc.? We have the technology to make this feasible. At a minimum, it could be the starting point for DC's plans about how to spend our money.