Bailout payout tops $8 trillion
As the holiday
season commences, it’s worth taking stock of the last gift that
President George W. Bush and the 110th Congress have left for U.S. taxpayers.
It’s a package of about $8.7 trillion dollars’ worth of
potential taxpayer commitments for loans, guarantees and other
bailout goodies for businesses and distressed homeowners.
Amid the tissue paper:
• More than $1.5 trillion in Federal Deposit
Insurance Corp. loan guarantees, including a $139 billion
assist to the lending arm of General Electric Corp.
• $1.8 trillion in cash, tax breaks and loan guarantees doled
out from the Treasury Department to
taxpayers, financial institutions and credit companies.
• $300 billion for homeowners from the Federal Housing
Authority.
• $25 billion in assistance for auto companies from a program
overseen by the Energy Department, which is separate from the
bailout proposal that tanked last week in the Senate.
• And $5 trillion worth of new money, loan guarantees and
loosened lending requirements from the Federal
Reserve Bank.
According to Bianco Research President James
Bianco, who crunched these numbers, that amounts to more
government aid and assistance than nine other historic bailouts and
big government outlays combined.
The New Deal, for instance, cost an
estimated $32 billion in its day, which would be about $500 billion
in today’s dollars. The Marshall Plan cost
about $12.7 billion, which is the equivalent of a paltry $115.3
billion. The Louisiana Purchase? The French
got $15 million, which would be worth about $217 billion
today.
If you take those three items, add in the adjusted costs of the
Race to the Moon, the savings
and loan crisis, the Korean War, the Iraq war, the
Vietnam War and assistance for NASA, you
still get to just $3.92 trillion — not even half of the taxpayers’
exposure today, according to Bianco.
If that weren’t enough to make you want to upgrade your holiday
gift list, it’s useful to remember that Congress isn’t done and
President-elect Barack Obama’s team hasn’t
even started.
They are promising a newer and bigger stimulus
package early next year — one that could make last spring’s
$168 billion government giveaway to taxpayers (remember that
fixer?) look like pocket change.
Asked just how much the taxpayers are on the hook for, Bianco
said: “I just say you should use the number infinity, because
nobody understands these numbers, and I would include the Treasury
secretary and chairman of the Fed in that group.”
There is a bright side, sort of. Only about $2.9 trillion of the
government money, loans and guarantees have actually been spent or
committed.
And some of the deals are structured with the idea that
taxpayers could one day make money off them by selling pieces of
companies or the government’s new stake in them.
But that can’t be done until the economy rebounds, something
that most economists aren’t yet willing to predict — probably
because it would be even more depressing.
Now, all this is not to say that these measures weren’t
necessary to save consumers from an even worse fate. That’s a big
unanswered question that now will be left to speculators.
But the vast majority of the smart economic crowd, from both
sides of the aisle, say the job losses and economic calamity that
would have ensued without government
intervention today would make the Great
Depression look like an economic hiccup.
“If we don’t fix this, it doesn’t matter if we can’t pay for
it,” said Heather Boushey, a senior economist
at the Center for American Progress. “The problem will only get
worse and become harder and even more expensive to fix.”
Meanwhile, she said, unemployment rates
could soar abruptly, as they did during the Depression. “Every
person who loses a job could also lose a house and health insurance
and the ability to pay for college,” she added. “We could lose a
generation.”
Given that, it was something of a wonder when Senate Republicans
quashed a $14 billion rescue plan last week for domestic
automakers.
Republicans had taken a beating on Election
Day, in part because of resentment within their own base at
the bailout bonanza in Washington.
But the automakers’ request seems a pittance given all the
taxpayer cash already flooding the private market.
Part of the answer might have come from an Obama-style Internet
campaign launched by FreedomWorks, a
grass-roots organization led by former House Majority Leader Dick
Armey (R-Texas).
FreedomWorks purchased Google search ads that popped up any time
someone clicked for information about the auto bailout. The ad
urged people to oppose the measure.
Thomas Keeley, the organization’s online advertising specialist,
said the ad helped them generate nearly 100,000 messages to
Congress. “We did very well, especially given the limited time we
had on this,” he said.
The auto industry wasn’t idle. General Motors and Ford also took
out Google search ads urging support for the package — a message
that would have been tough to deliver in a big television ad campaign.
The cyberspace campaigns are likely a harbinger of how future
bailout battles will be waged once Obama takes office with an
e-mail list of more than 10 million supporters.
Already, Peter Greenberger, who’s heading up Google’s new issues advocacy sales team, says he’s
warning interest groups that may take a stand on either side of the
Democrats’ expected trillion-dollar stimulus
package not “to organize a 20th-century advocacy campaign
against a 21st-century administration.”
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