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Trump, the GOP Tax Cut, and the Powers of 10
The Difference Between the National Debt and the Budget Deficit
When we talk about taxes, we have to talk about the national debt and the national budget. They are two different, but yet related entities. The national debt is how much debt the federal government has incurred from the time of the first president up until the current president. The current national debt is approximately 20.6 Trillion. The reason it is approximate is because it is being added to the current debt, even as we speak.
The current national budget deficit is approximately 655 Billion. That is the difference between what the federal government has spent on a fiscal year basis and what the IRS has taken in as revenue. According to the Congressional Budget Office (CBO), the federal spending is at 4 Trillion while the IRS income revenue is at 3.3 Trillion dollars.
Trump and the GOP Tax Cut
Trump and company has stated that their tax reform bill will add a total of 1.6 trillion to the national debt. But not to worry, it will be spread over the next 10 year period and with the huge tax breaks that the super rich and big corporations get, they will make up the difference in that 1.6 trillion gap. They state this will be accomplished by corporations creating more jobs, raising workers wages, and tax cuts for the middle class, thus stimulating the economy by more spending. However, will it be enough for the IRS to get an increase in revenue to close the 1.6 trillion gap?
There are two ways the budget can be balanced. One is by increasing revenue and the other is by decreasing spending. I don't think they will decrease spending, not with all the things that Trump and company want to buy, including a huge increase in defense and infrastructure, including his wall.
The Powers of Tens
Billions and trillions are big numbers to visualize, but there is an easier way to do this with the power of tens or it is also known as Scientific Notation. So if we were to write one thousand in Scientific Notation (SN), it would be 1X10^3. That is read as one times ten raised to the 3rd power of ten. The upward pointing arrow denotes "raised to and is called an exponent." This can be written as the number one followed by three zeros, or 1,000. One million is 1x10^6. That is one followed by six zeros. One billion is 1X10^9 and one trillion is 1x10^12, that is a one followed by 12 zeros.
The 1.6 Trillion Gap Spread Over a Ten Year Period
We now know because of the powers of ten, 1.6 trillion can be written as 1.6x10^12 which is the same as 1.6 followed by 12 zeros. Now that we know how to express big numbers by the powers of ten, we can also perform arithmetic operations on them. Trump and company said that the tax gap would be spread over a ten year period. let's see what that means in terms of trillions of dollars.
To divide by the powers of 10, you just have to divide the coefficient 1.6 by 10. That equals .16X10^12. Now if we move the decimal point three places to the right, we have to subtract the exponent 3 from 10^12; the expression becomes 160x10^9 or 160 billion. So that means that in order to close the tax gap, it will take 160 billion dollars of additional revenue each year for the next 10 years or decrease spending by 160 billion dollars each year for the next ten years.
The question is: Will this tax bill allow that to happen? Presidents have a way of creating long term policies that are well beyond their terms in office. But we have seen from the past, it is very easy for a new president to change previous embedded policies.
Added Bonus: If you want to learn more about the powers of ten and how they are used in computer terminology, please proceed to the next section, if not skip that section and proceed to the survey .
Powers of Ten and How They are Used in Computer Terminology
First it is nice to know the difference between bits and bytes. A bit is called a Binary Iteration Time (bit), It is the time it takes the computer to write a one or zero. A byte is 8 bits.
1x10^3 = Kilo as in kilobytes or bits. It is 1,000
1x10^6 = Mega as in megabytes It is 1,000,000
1x10^9 = Giga as in gigabytes or gigahertz. It is 1,000,000,000
1x10^12 = Tera as in terabytes It is 1,000,000,000,000
We can move the decimal point to left of the one as well and express it as follows.
1x10^-3 = Micro as in microseconds. It is .001 or one thousandth.
1x10^-6 = Milli as in milliseconds. It is .000001 or one millionth of a second
1x10^-9 = Nano as in nanoseconds. It is .0000000001 or one billionth of a second
How to Multiply and Divide in Powers of 10
To multiply, just multiply the coefficients and add the exponents. For example,
3x10^3 times 5x10^6 = 15x10^9
To divide, just divide the coefficients and subtract the exponents. For example,
50x10^12 divided by 10x10^9 = 5x10^3
Addition and subtraction are much more complex if the exponents are not of the same value, it involves factoring and manipulation of values. If the exponents are of the same value, then add the coefficients and leave the value of the exponents the same. Example,
14x10^4 plus 20x10^4 = 34X10^4
Do you think that Trump and the GOP will be able to close the 1.6 trillion dollar tax gap with their tax reform bill?
Did you find the power of tens tutorial useful?
© 2018 Mike Russo