It’s a little hard to get your head around, isn’t it – the ever expanding federal rescue? A billion here, a billion there, and pretty soon the figures don’t have any meaning anymore.
A conservative estimate of the money spent on the rescue plan is $1.5 trillion. That’s the $700 billion originally requested to buy bad debt (though since used for other purposes), and the $800 billion more that Treasury Secretary Henry Paulson set aside this week. If you factor in the guarantees the government has made to cover loses by banks such as Citigroup, than the figure goes much higher, to more than $7 trillion.
To put these numbers in context, James Bianco, of investment research firm Bianco Research, looked at some of the biggest expenditures in US history. He adjusted the numbers for inflation and found that only World War II ranked higher in the hit to the taxpayer’s pocketbook.
Take but one example, the Louisiana Purchase. President Thomas Jefferson’s $15 million bargain from the French doubled the size of the US. In today’s money, that’s $217 billion – or about as much the government has pledged to cover losses by mortgage lenders Freddie Mac and Fannie Mae alone.
In the case of the Louisiana Purchase, we got the Midwest. In the case of the rescue, we may get our economy back. Are both bargains? It’s all a matter of perspective.