Jolley: Five minutes with $1 trillion

One trillion dollars. Let that number sink in. That's a lot of money, a one followed by 12 zeroes. It's one million times one million. Measured in time, one trillion seconds is 31,688 years. Hard to visualize, isn't it?

Try this: A one dollar bill is a mere .0043 inches thick.

Now let's begin to build a stack of those skinny little bills.

1. A stack of 1,000 one dollar bills measures just 4.3 inches high, easily hidden behind a sheet of note paper.
2. A stack of 1,000,000 (one million) one dollar bills measures 358 feet, the height of a 35 story building.
3. A stack of 100,000,000 (one hundred million) one dollar bills is 35,851 feet or 6.78 miles high, capable of intruding on high-flying commercial jet traffic.
4. A stack of 1,000,000,000 (one billion) one dollar bills is almost 68 miles high, reaching from sea level to the troposphere - one of the major outer layers of earth's atmosphere.
5. A stack of 100,000,000,000 (one hundred billion) one dollar bills measures 6,787 miles top-to-bottom, 28 times higher than the orbit of the International Space Station.
6. A stack of 1,000,000,000,000 (one trillion) one dollar bills is 67,866 miles thick, stretching one fourth the way to the moon and weighing approximately 10 tons.

And that trillion dollar stack of bills plus some change represents what the meat and poultry industry contributes annually to the American economy, according to a study released by the North American Meat Institute.

The public read the headlines and gasped in disbelief. Many people within the industry were astonished at enormity of it all. A trillion dollars, even by today's standards, is one helluva lot of money.

A few have questioned the numbers, not fully understanding the details. Grasping the scope of the research project requires a careful reading of the entire study. For most people, though, it means a long walk deep into the tallest weeds of economic arcania, a trip through a ten thousand-acre corn maze without a GPS, or an April 15th all-nighter trying to figure out your personal income taxes - just too incredibly complex to deal with.

So I called on the author of the study, John Dunham, who is the Managing Partner of John Dunham and Associates, and asked him to explain his work in terms that us economically unlettered might understand. His company "specializes in the economics of how public policy issues affect products and services." A well-known expert on U.S. economic conditions, he's an industry heavyweight who knows his way around even the most complicated spread sheet.

Q John, there has been a tremendous amount of press coverage about the 2016 Economic Impact of the Meat and Poultry Industry, the research project commissioned by the North American Meat Institute. The real headline grabber was the statement that meat and poultry was a $1.02 trillion business in the U.S. A lot of people looked at that statement with some skepticism. Would you explain how you reached that number? How wide of a net did you cast?

A. It's great to see all of the attention that the study is receiving. We think that it is extremely important that people understand how industries and businesses work and why they are so important to the country, and to our communities. The meat and poultry industry is indeed a $1 trillion industry, which is up a bit from the last time we did this analysis in 2012 (and the industry had a $900 million impact). I think it is important as well that people look at all numbers with skepticism and not take them at face value. As a firm we believe that it is important that all of our studies be open and honest, and we include all of our assumptions in a detailed methodology and ensure that none of our models are "black boxes."

That said, the key to understanding the scope of the meat and poultry industry is to understand how the NAMI itself defines the industry. In this case, we define it as those firms, and more importantly those individuals working for firms, that:

• Pack meat and poultry,
• Process meat and poultry into products (like sausages, meatballs, or chicken parts),
• Wholesale these products to retailers, and
• Sell these products to consumers (either in retail stores like butcher shops or supermarkets, or for consumption on premise like in restaurants).

This is a very common and reasonable assumption of how an industry would define itself. For example, the automobile industry is not just assemblers like Ford or GM, but would necessarily include dealer networks.

We ensure that the definition is modest in that we only count the percentage of a job that is directly meat related. So for example, if 10 percent of a supermarket's sales are meat, we count just 10 percent of that store's jobs.

Q. You talked about three tiers of the industry, a concept that's not familiar to a lot of people, but it helped shape the length and width of that net. What are those tiers and how are they related?

A. Yes, this is something that people often do not understand and it can take a bit of explaining. Economic impact studies measure the effect of an industry across the economy. Now if I was building the NIPA accounts which are basically the economic accounts of the United States, I would stop at the direct impact - or what we define as the industry itself, but in an impact analysis the goal is to understand how these activities effect the overall economy. It would be like measuring the size of the economy with the meat industry intact, and then comparing the size if the meat industry were removed from the earth and sent to - well Mars.

This means that we also want to calculate the economic footprint of those firms and individuals supplying the industry with goods and services. This can be firms that provide animals like cows and chickens, but also firms that provide logistics and trucking services, or firms that provide electricity, or that provide legal and advertising services. Heck, people who provide information services. Were the meat packing, processing, distribution and retailing industry to be moved to Mars, all of these firms and people would be just as impacted as those working in a packing plant. So it is necessary and legitimate to count them in an economic impact study like this one.

Another tier that we include is what economists call the Induced impact or multiplier effect, which is a fancy way to say those jobs and activities created because people working in the meat and poultry industry spend their wages in the local economy. These too are real jobs, held by real people working in gas stations, for retailers, for laundry and plumbing services, throughout a region.

To understand why these jobs are important and are "induced' by the meat and poultry industry just go to a town where a factory has closed down.. Go to a place like Detroit, or Akron, or Flint and see how many stores, restaurants, banks and other firms are shuttered. All of these firms depended on the factories in their communities and once those businesses closed, so too did the local economy.

You see, economic activities are interconnected, and the work performed by someone in a processing plant making hamburgers ripples throughout the economy. This is what we are measuring in an economic impact study like this one.

Q. You used something called IMPLAN methodology to establish a framework for your research. Would you explain how IMPLAN works in simple terms for us non-econ types?

A. Funny - I'm an economist, and for some reason many of the people working in my profession think that the more obtuse they are the smarter they sound.

IMPLAN is one of the standard input-output models of the US economy that are maintained either by the Federal government, or by private firms.

There are 4 or 5 of these models, and we think the IMPLAN one is simply the easiest to use and to maintain. Input-output modeling is really complex. It was actually developed in the 1940s as a war planning tool. The defense department needed to know how much steel they needed to build ships, tanks, rifles, etc. They worked with an economist from New York University who developed a mathematical system to help them do this. He eventually won the Nobel prize for this model.

In short, what IMPLAN allows us to do is to understand and track all of the components that go into producing a product. For example, a $1.00 package of hot dogs contains, a certain amount of pork (say 5-cents worth) an certain amount of chicken (maybe a dime) and some spices and stuff (another nickel). It also contains packaging, some amount of machinery depreciation, labor, financing, insurance, marketing expenses, etc. All of these things go into making a package of franks. IMPLAN allows us to add these up, and allocate them across about 500 different industry sectors. It helps us to calculate out the supplier and those "induced" effects that we talked about before.

Q. The decade long political mantra has been jobs, jobs, jobs and a trillion dollars worth of economic activity brings a lot of jobs. Tell me about the jobs and employment opportunities brought about by the meat and poultry industry. Let's start with the live animal side.

A. Wow, that's a tall order. Let's start with live animals. According to our models, there are about 890,600 people working in animal production. This includes hunting by the way since many of the packers we include pack and process deer, elk and stuff like that. There are about 153,000 people that pack and process meat and poultry, another 232,400 who wholesale these products and over 1,112,000 who depend on meat sales for their livelihood.

Now when I say people I am using it as a representative term. Our models work according to what we call Full-time equivalent employment where one job represents a little over 1,900 hours of work. A job can therefore be comprised of a lot of different individuals, each working a few hours for the meat industry.

Another 1.1 million jobs are created in firms that supply stuff to the meat and poultry industry. As I mentioned, these can be people making knives and machinery, people working for logistics companies, even government inspectors who supervise meat and poultry plants to ensure that they are safe and sanitary.

Q. Now, let's talk about downstream jobs in processing and retailing.

A. Some might question why these jobs are included, but they are real jobs held by real people. Someone working at a steak house has a job that depends on the sale of meat. Some part of every supermarket worker is paid out of the profits from meat sales. This is real economic activity and it is legitimate to discuss these jobs in this context.

What is not legitimate is to try to inflate the number by adding in suppliers to suppliers. So for example, while a job at a hamburger stand can be attributed to meat, we should not also attribute the job in the napkin factory, or the ketchup plant. These are important jobs too, but they are suppliers to the hamburger stand and therefore should be counted as part of the restaurant industry.

I often see organizations and in particular government entities inflate the value of the economic impact by taking the footprint out to the far dimensions of the universe. This is something that we are careful not to do by, no pun intended, putting a corral around the industry that we are working on.

Q. One of the surprises was the traditional animal agricultural states like Texas, Kansas and Nebraska ranked well behind some less ag-reliant areas like New England in terms of economic impact. Would you explain why that happened?

A. Sure, because you are looking at the industry as a whole. Retailing dominates most consumer product sectors (particularly in terms of jobs).

So states with large populations will have a lot of impact. Also, there are supplier industries that are not necessarily located where cows, chickens and pigs are raised.

If we just look at the agriculture inputs - remember the 890,600 people we spoke about before, the big states are Arkansas, Alabama, Georgia and Mississippi for poultry, Kansas, Nebraska, Oklahoma and Texas for cattle and states like Iowa, Indiana, North Carolina and Missouri for other animals." Commercial hunting, by the way, is big in Louisiana, Missouri and Texas in terms of the number of people working in the industry.

(The study — including state-by-state and congressional district breakdowns and a methodology report — can be found online at http://www.meatfuelsamerica.com/.)