November 25, 2008
Bottomless bailout
The latest figures on the government bailout are staggering, with more and more businesses and special interest groups clamoring for their share of the government's -- strike that -- clamoring for their share of your money, with some estimates putting the total nearing $8 trillion dollars.
It's hard to truly understand just how big the crap sandwich is that Congress and the saps at the Fed are trying to force feed us, but Barry Ritholtz puts it into perspective. I plugged the numbers from his post into a spreadsheet to illustrate it with a graph.
Whenever I discussed the current bailout situation with people, I find they have a hard time comprehending the actual numbers involved. That became a problem while doing the research for the Bailout Nation book. I needed some way to put this into proper historical perspective.
If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.
Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:
• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billionTOTAL: $3.92 trillion
That is $686 billion less than the cost of the credit crisis thus far.
The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).
Go figure: WWII was a relative bargain.
I estimate that by the time we get through 2010, the final bill may scale up to as much as $10 trillion dollars…
Bloomberg calculates the total amount the taxpayer is on the hook for is $7.76 trillion, or $24,000 for every man woman and child in the country.
Stop and consider that for a moment: the bailout has already exceeded what we spent to defeat Japan and the Nazis.
We are in the process of pouring gasoline on a fire, or, perhaps more accurately, putting sugar in the gas tank of our economic engine. Will anyone truly be surprised when the whole thing sputters and dies?
Leave the markets alone; let the painful process of economic Darwinism ensure that the strongest and fittest companies survive.
I'm not the first one to make this point, but when any firm becomes so large that it's "too big to be allowed to fail," then it's just too damn big, period.
The bailout is going to provide us with a cure infinitely worse than the ailment it purports to treat. I fear the patient may not survive the tender ministrations of the spendthrifts in charge of the national pursestrings.
Posted by Mike Lief at November 25, 2008 08:08 PM
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Comments
Those numbers are just too big to even get a grasp of. I'm a Republican but can't tell the difference between our alleged Republican leaders and Obama. Obama looks more steady in the press conferences he's had in the last few days than Bush and Paulson. Where does the bailout end? What will the dollar be worth if the government keeps pumping more and more cash into the bottomless pit of fiscally mismanaged companies? This is just too depressing for words to describe. Great post.
Posted by: Borris at November 25, 2008 09:21 PM
The bail-outs can only be financed by selling debt. The purchasers of that debt will probably continue to be our enemies in the next great war. How long they are willing to prop up our country seems to me to be entirely speculative.
The annual interest alone is $1200 per year per person. Assuming we all did the patriotic thing and pitched in to pay our share, my family would have to come up with nearly $5000. And since I would also be expected to pay for at least one similar family who doesn't pay taxes at all, my burden just goes up and up.
In the immortal words of Gunny Highway, this is a clusterfuck, sir.
Posted by: The Little Coach at November 26, 2008 07:58 AM