2008: Year of the bailout
We don’t name calendar years in America like they do in China, but if we did, it wouldn’t be hard to find a moniker for 2008.
It was "The Year of the Bailout."
A.I.G, Bear Stearns, Chrysler, Citigroup, Fannie Mae, Freddie Mac, Morgan Stanley, Indy Mac and GM are just a few examples of taxpayer-funded benevolence this year, as our government veered wildly (and expensively) toward nationalization and rule-by-decree in attempting to resolve a crisis largely of its own making.
While there is some confusion as to the current price tag of this growing "Bailout Mania," we know that over the past sixteen weeks the U.S. government has poured nearly $10 trillion dollars into "correcting" the market.
You heard that right, $10 trillion dollars.
Think about that number for a moment, because it’s a lot larger than the $700 billion financial services bailout George Bush signed on October 3, which effectively marked the end of capitalism as we know it in this country.
That so-called "Emergency Economic Stabilization" is the bailout most Americans are familiar with, including the $17.8 billion chunk of it that was awarded to Detroit automakers. But what about the rest of the money?
What about the $2 trillion in FDIC assurances, $1.75 trillion in Federal Reserve commercial paper purchases, $900 billion in term auction facility lending, $600 billion to insure money market funds, $600 billion to cover Fannie and Freddie’s worthless mortgage-backed securities, $550 billion for discount Federal Reserve loans, $500 billion to insure FDIC deposits, $300 billion for FHA mortgage relief, $250 billion for Citigroup debt, $225 billion for securities loan facility lending, $200 billion for Fannie and Freddie’s debt, $112 billion for A.I.G., and on down the line.
Add all those numbers up and you’re dealing with more than twice the inflation-adjusted cost of rebuilding post-World War II Germany, the Louisiana Purchase, NASA’s entire budget (since its inception), the S&L bailouts, Roosevelt’s New Deal, the Korean War, the Vietnam War, the Gulf War and the Iraq War – combined.
Again, that’s inflation adjusted – and all of it spent or pledged by our government within the last 16 weeks.
2009 could bring additional bailouts, as well, with President-elect Barack Obama proposing another $800 billion plan this week and a number of states announcing that they will seek $1 trillion from the federal government to bail them out of bad spending decisions.
The dimensions of this bailout culture are truly staggering, but other than trillions in "troubled assets," what exactly have ‘We the Taxpayers’ purchased?
For starters, a lot of debt. With only a fraction of the total bailout tab on the books, our national debt has already soared to more than $10.7 trillion dollars.
That’s an astounding 72.5 percent of our gross domestic product (GDP).
Eight years ago, the debt was $5.6 trillion, or 58 percent of our GDP.
Throughout this crisis, we were told by leaders of both parties that government had to "do something" or else we would face an "economic Pearl Harbor."
I would argue that with wealth disappearing, unemployment skyrocketing, productivity vanishing and consumers burying their money, the "economic Pearl Harbor" is upon is – and that the trillions in bailout funds did nothing to slow its fury.
In a recent article published in the Wall Street Journal, former American Express CEO Harvey Golub proposes a different solution.
"We must get back to our historic reliance on personal responsibility and market forces, and get government out of economic management," Golub wrote.
"It doesn’t do a good job, as the current economic mess amply proves."
I couldn’t agree more.
Let’s not continue down the same road this year. Let’s make 2009 the "Year of Fiscal Responsibility."
The author is Chairman of Americans for Limited Government.