Most people remember the controversy over the $700 billion bailout package the week it was passed in Congress. They are probably less familiar with the additional $800 billion bailout program the Federal Reserve launched under the radar two weeks ago while everyone was chomping on turkey.
And most people likely missed the trillions more in loans, loan guarantees, rotten asset purchases, debt restructuring and the like that Treasury Secretary Henry Paulson and his cohorts have heaped on since then.
As of deadline, they’d pledged to spend $8.5 trillion. (It seems to go up another trillion every week.)
That’s half the gross domestic product, or half of everything the nation produced last year, Bloomberg News reported.
How can we afford that, you ask? We can’t. So we plan to borrow it. To give you some idea of the scope of the unholy bill we are racking up here, consider this. The national debt, which it took us decades to accrue, was $10.6 trillion before the bailout binge started in September.
If we cut the checks the government has promised, we will have nearly doubled the national debt in the space of about 12 weeks. The $8.5 trillion is equivalent to $24,000 for every man, woman and child in the country, and nine times what the United States has spent so far on the wars in Afghanistan and Iraq, Bloomberg reported.
And it doesn’t count the trillion dollar stimulus package the Democrats have planned for early next year.
“The strategy now — and in the coming Obama administration — is essentially the win-at-any-cost approach previously adopted only to wage a major war,” a Los Angeles Times article warned. “And that means no hesitation in pledging to spend previously near-unimaginable sums of money and running up federal budget deficits on a scale not seen since World War II.
“Analysts warn that the nation’s next financial crisis could come from the staggering cost of battling the current one,” the same Times article read.
Economist after economist has told financial reporters at the world’s well-known news services the same thing. Spending vast sums of money essentially printed by the government will lead to spikes in inflation, the experts seem to agree. The trick is to stop before that happens. But no one seems to agree on exactly when that point is.
Of course, on the bright side, we might get some of the loaned money back, with interest, some say. Or not at all. No one outside the Treasury Department knows for sure because Paulson and his sidekicks at the Federal Reserve and other bailout-allied agencies have so far refused to disclose the terms of much of the lending they are doing. Is there any collateral? If so, what is it?
So far only a handful of Republicans in the House and some inquiring minds in the media seem genuinely concerned about the answers to those questions. President Bush shipped out to Peru for the worst of it, where he made speeches about the evils of interfering with capitalism. Aside from a few barbs thrown at Paulson, House Democratic leaders who spent years haranguing Republicans for their deficit spending have been largely silent. They don’t want to rock the boat when there’s hundreds of billions more that remain unspent, money they’ll get their hands on when they take over the White House in January.
Meanwhile, Paulson and Federal Reserve Board Chairman Ben Bernanke have largely blown off House Republican Leader John Boehner, who keeps writing them letters asking stuff like how they determine which businesses to give billions to, what the terms of the loans and other financial arrangements are and whether there is any system in place to determine if what we are doing is making any kind of difference in the economy. Until recently, Congress and the president hadn’t even filled oversight positions to monitor what the bureaucrats charged with rescuing the economy were doing.
Elizabeth Warren, who leads the Congressional panel appointed to monitor the bailout, told The New York Times that the federal government still doesn’t seem to have a coherent strategy for fixing the financial crisis and seemed to be lurching from one tactic to the next.
All of which makes me wonder what is actually going on here. If the economy is in bad enough shape to justify potentially doubling the national deficit to fix it, wouldn’t you have a plan for doing so? One with goals? Wouldn’t that be important to you?
Or has the economy merely caught a bad cold that politicians are using as an excuse to go on the mother of all spending benders? Could it be that the outgoing administration is looting the treasury to a degree never before seen in this country’s history and the incoming administration wants to pick up where they leave off?
Should be interesting to find out. One thing you can be sure of, though.
Either way, you pay.
This article appears in Dec 9-16, 2008.
