The Cost of the Bailout In Perspective

by Sal on November 25, 2008

in Economy,Politics

Barry Ritholtz is writing a book entitled Bailout Nation, about the current economic crisis and how we are using bailouts to try to solve it.  On his blog, he posted an interesting point, about the cost of the bailout.  When adding in the Citi bailout, the total figure thus far comes somewhere between $4.6 trillion and $7.4 trillion, depending on who you ask.  This is one of the biggest expenditures in American History.  When adjusting for inflation, the money we have spent on the bailout — all in 2008 — exceeds the combined costs of all of the following:

  • Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
  • Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
  • Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
  • S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
  • Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
  • The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
  • Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
  • Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
  • NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

That is some price tag.  The government is spending this enormous sum of money to “fix” a problem that may not be fixable by this sort of bailout.  When one considers that the national debt is “only” $10 trillion, and we are going to add at least another $4.6 trillion from these bailouts alone and who knows how much more, I can’t see how this is going to be good for the economy.  Won’t this vast increase in the money supply lead to a complete devaluing of the dollar, leaving us in a situation similar to Germany after World War I?

What is the end-game for this bailout money, and what are the unintended consequences going to be?  I fear that we are in uncharted territory, and while I agree that we are not in another Great Depression, I do have a sense of foreboding about the future of our capitalist economy with massive infusions of cash such as this, soaring national debt, and the onslaught of liberal fiscal policies and new spending programs (not to mention Universal Health Care).  It is a cause for concern.

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