Economics 101

A new research brief from Defeat the Debt shows that over three-quarters of members of Congress lack an academic background in business or economics.

Of course, that doesn’t mean they’re incapable of doing their job: This country has had scores of elected representatives without a formal economics or business background who have performed their service admirably. Still, with the twin concerns of a “double-dip” recession and a $16 trillion national debt confronting the country, it’s undeniable that a working knowledge of economics is an important asset for a modern member of Congress.

So, as a public service to our elected representatives, we’re collecting suggestions from our business- and economics-minded visitors on basics that members of Congress should be up-to-speed on.

Email your suggestions (which we may publish on the website) using this form, or submit them on Facebook.

We’ve provided a couple lessons below to get the process started. Perhaps these lessons seem obvious to some visitors, but they may not be clear to members of Congress who have never cracked open an Econ 101 textbook.

  • Lesson Number One: One trillion dollars is much, much larger than one billion or one million dollars

Big numbers can be difficult to understand. Whenever a word ends in “—illions,” it’s easy to just think of it as a whole lot of something, and nothing more. But there is a huge difference between one million and one trillion.

Consider: One million seconds will pass in the next 12 days; one billion seconds will take 32 years. But one trillion seconds will take 31,688 years to elapse. Multiply that by fourteen, and you have some idea of how large our $15 trillion debt is.

  • Lesson Number Two: If you’re spending more money than you take in, you have to borrow to make up the difference.

While there seems to be no limit to the number of programs that members of Congress would like to fund, there is a limit on the money available to fund them—the money that the government receives from income taxes and other forms of revenue.  In 2010, the U.S. government took in $2.16 trillion dollars, but had $3.45 trillion in obligations and projects it spent money on. The result was a deficit of about $1.3 trillion, which we had to borrow from lenders domestic and foreign.

To avoid borrowing money, the government has two options: They can either raise more revenue, or spend less money. That brings us to the third lesson.

  • Lesson Number Three: If you tax something excessively, you get less of it.

Because it’s difficult to stop spending money on politically popular programs, many members of Congress prefer to raise revenues through, for instance, raising taxes on the income of wealthier Americans.

However, the top 2 percent of earners–those making approximately $250,000 a year or more–are already paying 46 percent of the country’s income taxes.  Although it seems counter-intuitive, raising taxes further on this small group of earners could decrease government revenue, as wealthier Americans choose to work less or find creative ways to bypass the higher tax rates.