The $5.4 trillion we'll pay if the stimulus package doesn't work
A major sticking point with the bailout discussion is cost. Republicans have blared endless about just how much a trillion dollars is -- a stack of $100 totaling a trillion could reach Pluto or something, go around the globe at the equator eight zillion times, etc. One facet of the stimulus package story that nobody is discussing, though, is how much the government will pay (with our money) if the package doesn't work. A cursory glance at the details of our country's budget problems makes $1 trillion look like a bargain.Last month, Harper's Magazine had a cover story that I wish they would make available online because the link would go viral, and you would get better pictures of the graphs in it then crappy ones I take with my cell phone camera. Anyway, the story is titled "The $10 Trillion Hangover" and it details the money added to our national debt by the Bush administration. $10 trillion is actually a conservative estimate -- the debt could balloon to $13-15 trillion. Why? Ask Freddie and Fannie.
I made a photocopy of the article (and went at it with a highlighter, which I may not have done if I knew I would post a photo of it online in the future), and to your right is a crappy picture I took showing one part of one graph in the article -- the mortgage back securities debt part. The full graph itself is called "The Bill" and it succulently details all the debt added to the government over the past eight years. Now the graph attributes $.1.6 trillion to the government taking over Fannie and Freddie, but that's a low estimate. This blurb from the article shows why the mortgage debt is a real wild card:
When the federal government took over these failing residential mortgage giants, it also assumed their $5.4 trillion in mortgage-backed securities and outstanding debt.
Cutting straight to the point, that $1.6 trillion the government is responsible for now will balloon -- potentially to $5.4 trillion -- depending on the amount of home foreclosures in the future. Those are costs the government will have to account for. And whose money will they use? You guessed it, yours.
This makes current discussions on the cost of the stimulus bill silly. $1 trillion? Pshaw! Try $5.4 trillion if the stimulus bill doesn't work. A trillion has now become pocket change.
The choice for the Obama administration is simple: get real stimulus done. If this means hopping off the bipartisan pony ride and even, if necessary, brutally bludgeoning that pony to death, do it -- or we all suffer the consequences. And what are those consequences? It could be a repeat of the 1930s... Do you want to find out? You shouldn't. I certainly don't.
Labels: $10 trillion dollar hangover, debt, economy, fannie mae, freddie mac, harper's, mortgages, Obama, stimulus, the great recession
posted by Tucker @ 11:20 PM
3 Comments
3 Comments:
The definition of "pork" is so loose, though... For example, money to, say, family planning organizations is called "pork". But if it's proven that such money has a multiplier (like if it causes contraception to be made available for free, reducing the amount of unwanted pregnancies, therefore reducing the load on Medicaid and saving money), then how is it "pork" ie: wasteful? Whereas the Republicans want to continue Bush's tax cuts from the past 8 years which essentially give people to the rich. Regardless of one's biases either way on Bush, the empirical evidence on how tax cuts effect our current economy is in and it's not pretty. Yet advocating for tax cuts now somehow isn't pining for "pork", ie: wasteful spending...?
I don't get it.
The "pork" argument is really a red herring. Social programs help slow or stop the bleeding, that's not pork. And any money which creates jobs helps heal the economy.
And, as I summarize in my post, $1 trillion is no longer a lot of money when we stare at the long term prospects. If $1-2 trillion in stimulus works (as it likely would as long as it shores up our social safety net and creates jobs; and isn't focused on tax cuts), it saves us $3-4 trillion in the long run. Unless there are some variables I forgot to factor in, the choice here is pretty damn simple.
Republicans are thinking about the midterms. Did Obama believe his own rhetoric about working across the aisle or he is positioning the GOP as do nothing obstructionists. Clinton was good at hammering Gingrinch. How Obama plays this will decide 2010.
Honestly, I think Obama might actually believe he can work across the aisle. If this stimulus bill doesn't work it will play into the GOP's hands in 2010, so why let them fuck with the bill so much? Why let them make 40% of it tax cuts when they don't intend to vote for it anyway? That only hinders the stimulus. Besides that, Obama isn't going to route that FDR did of setting up different programs (each with their own bill), and if one didn't work try a different one; letting the public know that this is a process. Obama isn't treating this situation like a process; the stimulus bill right now is the end all-be all. If it fails, that's rather scary.
Smart politics would be to spread your eggs out, not put them all in one basket.
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