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.