Two weeks ago the Record-Bee printed a piece, I sent about the $750 billion dollar bailout. In it I opined that it would go down as the greatest fleecing of the American taxpayer in history, making the Savings and Loan fiasco look like chump change. As an update, the total cost of the bailout is now actually $2.3 trillion and mounting daily.
How can that be you might ask when the advertised figure is so much lower ? Well, per Bloomberg.com, it breaks down as follows:
$150 billion given to AIG — $85 billion initially, another $25 billion, and another $40 billion. $170 billion for banks who sold preferred stock to the government (with no guarantee they would use the money for loans). $ 2 trillion in emergency loans from the Federal Reserve to banks under 11 different programs that are separate from the TARP program, and which didn”t require approval by Congress and hence are not subject to “transparency”.
So, the minimal total so far is at $2.32 trillion, not $750 billion. Additionally, banks can still apply to get another $80 billion in aid which is not included. The tax code was also changed by the Treasury Department, which some conjecture could give merging banks a savings of $140 billion in taxes.
The government is basically prepared to hand out at least $2.5 trillion to banks in addition to the advertised bailout. But as the infomercials say “but wait, there”s more!”
These figures don”t include the funds the Treasury Department has offered up to help Fannie and Freddie Mac and the new Hope for Homeowners Program, totaling $500 billion. That amount does not include billions more that seem slated for the big three auto makers and yet to be announced business failures. Like a matador waving a red rag in front of a bull, the government mesmerizes us with jingo accounting and a facade of “transparency”.
This results in a total of at least $3 trillion committed for the next several generations of taxpayers to cover, on top of a long term structural deficit of over ten trillion dollars ($10,641,709,982,584.01).
Now let”s tack on national health care, selective tax reductions, capital gains and corporate tax increases (all great ideas in a recession) and additional expenditures to finance these massive bailouts and structural debt. Soon the credit card companies will start to line up for money as their bottom lines implode.
The net result will likely be decades of economic turmoil. In this bailout plan, the culture of productivity is punished and bottomless debt is glorified, while gross incompetence and fiscal insanity pass for leadership in Washington and Wall Street. Neither party gets a gold star this semester and measuring relative culpability is a useless exercise. We need better thinking at all levels of government, as the deficit financing model has been a disaster.
Buying political loyalty and votes via expenditures costs too much when it damages our structural economy to the point of no return. We also need to acknowledge that too many of us have been seduced by this credit based economy and lost all pretext of fiscal responsibility, along with our politicians. They just do it on a much grander scale.
Reasonable use of credit is a good thing, irresponsible debt is a bad thing at any level of society or government. It will be bitter medicine for the truly addicted as the fantasy of endless credit and debt is quite alluring.
Alternatively, passing on this mess to future generations with little hope of solution may be politically palatable now, but is a grave disservice to those that follow us.
Jerry Nicoletti is a resident of Kelseyville. Opinions expressed in all Guest Commentaries are solely those of the individual writers and do not necessarily reflect the views or endorsement of the Lake County Record-Bee or its staff.
