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Issue 11 • FEBRUARY 11, 2009 Numbers Too BIG to Wrap Your Head Around
The bill currently being hammered out between the two houses of Congress, however, is merely icing on the cake compared to the total cost for which Americans are now on the hook. In fact, the numbers involved are simply mind-boggling. Many decades ago, a fiscally responsible member of Congress famously said, “A billion here, a billion there, pretty soon you're talking real money1.” In his wildest dreams, he probably never would have imagined the TRILLIONS of DOLLARS being thrown around “here and there” in response to the current financial crisis. In fact, the stimulus package currently working through Congress ups the ante to $9.7 TRILLION in total government commitments, according to a recent Bloomberg story2. This is a financial obligation that you and I and millions of taxpayers (and our descendents) are on the hook for— perhaps for many decades to come. It’s difficult to even wrap your head around the kind of spending and lending of this magnitude. According to Bloomberg, $9.7 trillion in taxpayer pledges are enough to “send a $1,430 check to every man, woman and child alive in the world...and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion3.” Perhaps Bloomberg is on to something here...Rather than providing bail-outs and loans to the financial sector, Congress could just pay-off everyone’s home mortgage loan instead, which should put a quick stop to soaring foreclosures. To place today’s $9.7 TRILLION price tag into better historical context, let’s compare it to some of America’s biggest government spending binges of the past (see graph).
The estimated cost of $500 billion that FDR committed us to in digging out from the Great Depression is merely a drop in the bucket compared to the cost of today’s mess. Even the U.S. Savings & Loan crisis in the 1980s, which cost taxpayers an estimated $256 billion, looks like a good deal by comparison5. In fact, the cost of bailing out our financial sector and the broad economy from the current credit crisis is MORE than ALL of these historic spending binges COMBINED. Of course, even bigger numbers than this are being thrown around to describe this unprecedented event in American financial history. For instance, Bloomberg estimates that $14.5 trillion in global stock market value has been lost just since Lehman Brothers filed for bankruptcy on September 15, 20086. The total LOSS to U.S. household net worth is already $13 trillion, as a result of falling home values AND plunging financial markets... and it may reach a staggering $20 TRILLION by the end of 20097! The true cost of this crisis will, of course, not be known for some time, and well after the fact. The American people have every right to expect full transparency and disclosure regarding each penny that’s spent on our behalf. Ultimately, the cost of the unprecedented money printing necessary to pay for this bailout will impact our economy and financial markets in unintended ways. When the global economy finally gains some traction again down the road, inflation may be the next big crisis we face, rather than today’s deflation disaster. Good investing,
1 Los Angeles Times: “The bailout: A hundred billion here, there, everywhere” 9/22/08 Disclaimers: 1. Weiss Advice is a publication of Weiss Capital Management, an SEC Registered Investment Adviser. Weiss Research is a separate, but affiliated publishing company. Both entities are owned by Weiss Group, LLC. 2. "Weiss Advice" is published for general information and educational purposes only and should not be construed as a specific recommendation to buy or sell any security. Specific recommendations can only be given to advisory clients of Weiss Capital Management, with the benefit of knowing their financial condition and suitability. View Weiss Capital Management's Privacy Policy. To make sure you don't miss our urgent updates, add Weiss Advice to your address book. Just follow these simple steps. |
Congress has been burning the midnight oil this week, wrangling over how much “stimulus” (or “pork”) to include in the much-debated American Recovery and Reinvestment Act of 2009. 
As you can see, the current $9.7 trillion tab taxpayers are on the hook for is nearly three-times the size of the next biggest spending event in U.S. history— the inflation-adjusted cost of fighting World War II ($3.6 trillion)
