[Pen-l] Bailout: comparative numbers

[Bill Burgess]

Some comparative numbers on the relative scale of the 'bailout'. Has 
anyone seen some good numbers on the relative scale of actual and 
proposed government spending on infastructure and other public 
projects (as opposed to loans to postpone corporate bankuptsies, etc.)?

by NEIL REYNOLDS

Globe and Mail Update

December 31, 2008 at 6:00 AM EST
http://tinyurl.com/99qwd7

What's a billion? What's a trillion? What's $8.7-trillion (U.S.)?
What's $10.4-trillion? James Bianco, president of Chicago-based
Bianco Research Inc., provides specific answers to each of these
questions - helping, in the process, to make these numbers
comprehensible.

Mr. Bianco calculated the contemporary cost of a number of
historic U.S. events, adjusted these costs for inflation and
compared them with the combined cost of the U.S. bailout of
financial institutions - either spent or pledged in the autumn
meltdown of 2008.

This much becomes crystal clear: President Franklin Delano
Roosevelt's New Deal was (in comparative terms) downright cheap.

Here are some of the key calculations in Mr. Bianco's analysis.

In 1803, President Thomas Jefferson paid France $15-million for
land that now forms 25 per cent of the United States. Adjusted for
inflation, the Louisiana Purchase cost $217-billion in 2008
currency.

From 1932 through 1939, President Roosevelt's expenditures on the
New Deal consumed $32-billion - or $500-billion in today's
currency.

In the years following the Second World War, the U.S. spent
$12.7-billion on the Marshall Plan reconstruction of war-torn
Europe - or $115-billion in today's currency.

From early 1950 through 1953, the U.S. spent $54-billion to wage
the Korean War - or $454-billion in today's currency.

From 1961 through July 16, 1969, the U.S. spent $36-billion on
President John F. Kennedy's race to the moon - or $237-billion in
today's currency. (President Kennedy had promised to put an
American on the lunar surface "before the end of this decade.")

From the late 1980s through the early 1990s, the U.S. spent
$154-billion to compensate the clients of 747 bankrupt S&L
(savings and loans) institutions - or $256-billion in today's
currency.

In the Vietnam War (1955-1975), the U.S. spent $111-billion - or
$698-billion in today's currency.

In the Persian Gulf war (1990-1991), the U.S. spent $550-billion
to oust Iraqi dictator Saddam Hussein from Kuwait - or
$597-billion in today's currency.

Add the costs of all these events together and you get a total -
in today's currency - of precisely $3-trillion, which is close to
the actual deployment of bailout money in the economic meltdown
thus far: $2.8-trillion. But this $2.8-trillion is only a small
part of the $8.7-trillion that various U.S. agencies and
institutions have pledged. To accumulate enough historic spending
to match this higher number, you would need to throw the most
costly enterprises of the country onto Mr. Bianco's list.
Arbitrarily, let's add the global cost of the First World War
($2.6-trillion in today's currency) and the U.S. costs in the
Second World War ($3.6-trillion in today's currency). Total:
$9.2-trillion.

These expenditures now exceed U.S. bailout commitments by
$500-billion - an amount, incidentally, that would cover the cost
of putting a human colony on Mars and of meeting all of the UN's
millennium goals (among other things, eradicating extreme poverty
from the Earth) by 2015. But the $8.7-trillion, thus far, in
meltdown commitments - such as liquidity directed to financial
institutions - does not include the stimulus package already
approved by Congress - known as the Troubled Asset Relief Program,
or TARP - which exceeds $700-billion, or the expenditures that
will be approved early in 2009 when president-elect Barack Obama
takes over the White House. The Obama team has signalled its
intention to enact a stimulus package worth $1-trillion. Combined
with the stimulus package already enacted, the combined bailout
costs rise to $10.4-trillion ($8.7-trillion in tranquilizers for
Wall Street, $1.7-trillion in stimulants for Main Street).

There's yet another global expenditure that helps put the U.S.
bailout program in perspective. In his celebrated warning on
global warming, British economist Lord Nicholas Stern put the
future cost of controlling climate change at $9-trillion -
expressed in 2006 dollars, though expended over the next hundred
years. In other words, the U.S. Federal Reserve could apparently
finance the global-warming expenditures of the entire world, for
the next hundred years, simply by printing precisely the same
quantity of cash it has casually printed to thwart deflation in
the last three months.

The U.S. response to a deflationary recession appears excessive.
The size of the American domestic bailout now approaches U.S. GDP
itself ($14-trillion). What happens when your bailout costs exceed
your GDP? Mr. Bianco answers with the suggestion that economists
"use the number infinity" in calculating final bailout costs. "No
one understands these numbers," he says, "and I include the
Treasury Secretary [Henry Paulson] and the chairman of the Federal
Reserve [Ben Bernanke]."

As for Canada, we look thrifty - yet still modestly heroic - in
comparison. Finance Minister Jim Flaherty talks up a stimulus
package worth $30-billion (Canadian). This compares historically
to the costs Canada incurred in the First World War ($1.6-billion
in 1918 currency, $22-billion in today's currency). Yes, there
were only nine million of us in 1918, and there are 30 million of
us now. But it's wise, strategically, to hold something in
reserve. We are probably in the first skirmish of a protracted
war.

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