Is Trillion the New Billion?

Abstract

Not so long ago, $1 billion seemed worth worrying about - as Everett Dirksen, the late senator from Illinois, was supposed to have said, "A billion here, a billion there, and pretty soon you're talking real money." Today, another trillion-dollar commitment by the Federal Reserve makes headlines for only a day or two, and a projected federal budget deficit exceeding $1 trillion is widely viewed with equanimity. Are we courting disaster in this indifference to inconceivably large sums? Or have the extraordinary challenges faced by the economy today fundamentally altered the arithmetic of government finance? The answer is yes - and yes.