Simply using inflation-adjusted figures is misleading.

Although one could argue not more misleading than comparing government expenditures to government assumption of debt (although in reality it is more complicated than this simply binary, in each pie chart).

-Math/Economics major

My supposition that this form of bailout would be better than the proposed Big Three bailout and other recent bailouts was of the "less bad" variety, not of the "we should do this instead" variety, which I though I clearly articulated. In summary: Pay your bills, run your companies well, and don't ask for my help when you screw up.

I don't think there's all that much value in arguing _which_ way the government should irresponsibly spend our tax money, but rather _why_ the government should be doing any of it in the first place. It shouldn't.

This is what we call a classic "Apples-To-Oranges Fail"...

When it comes to subsidizing risks and costs of big business in this country, there are no limits.

When it comes time to help the working stiff (or used-to-be-working stiff, well, then we bust out the tough love and tell them "you gotta lift yourself up by your bootstraps".

@imjustabill: I'm talking about the American Indians. And yes, the Europeans are also in the business of taking thing away from brown people. The French didn't own that land anymore than we did. We just planted our flag and took it.

Of course THAT would be nasty, filthy socialism, not like the bailouts, no siree...

Or we can "save" AIG temporarily... hmmmm... tough choice...

Actually you could easily make the argument that the bailouts are FAR LESS an "investment" than most of those other items, war excluded. We get guaranteed zilch from the bailout.

I mean, let's adjust the whole deal instead of the final numbers. Jefferson wanted to spend $10 million just for New Orleans. Adjusting for inflation, that's $137 billion for one city. So, the offer really was, "hey, throw in another $80 billion and we'll give you another 800,000 square miles and you can double the size of your country".

So, I guess it's technically true that it cost less than some of those other things. Of course, it's also technically true that if I found some down on his luck stock broker and he offered to trade me his new Bugatti Veyron for a for a bottle of Colt 45, then I could say a BV costs less than what I plaid for my first car.

Have none of you heard the numbers on how much money EACH AMERICAN (or family) could have if this money was divided up? You wouldn't need half of these banks if we had the money ourself. We could ALL pay off our mortgages, pay for college, retire, etc. No need for banks, loans, etc. Nobody really talks about that though.

@Ben Popken: ha - free shipping!

@nataku83: two words to "lowered taxes" (especially with a Dem-led govt) - NEVER HAPPEN!

It's an investment alright, but is it a good one? It might be, if these companies learn from their mistakes and start acting responsibly. But of course, they know the extent to which our economy depends on them, so I'm afraid they will keep doing the same damn things, secure in the knowledge that the government will bail them out next time.

I'm not necessarily certain that we shouldn't be doing this. I'm not even certain we have a choice. I'm just afraid it's setting a dangerous precedent for irresponsible businesses.

Borrow (primarily from foreigners) at extremely low rates to finance fiscal intervention? Then pay them back with even stronger dollars?

If only Americans were so lucky every day.

The remainder of the 'bailout' (I keep putting it in quotes because there have been dozens of separate interventions) is coming from the Fed. The Fed injects liquidity with either "shelf money" (that isn't already in the money supply) or newly-printed money, by buying government bonds.

It can get away with this because of massive deleveraging in the financial sector.

(explaining de-leveraging) When banks take your money and then loan it to someone else, they are effectively producing money. Now, instead of just being the one dollar that you have, now there is the one you have in the bank, and the one that the borrower has in his pocket (or more likely in another bank, adding to the effect). When banks stop lending or otherwise using leverage, the opposite happens, and the money supply shrinks.

As long as the effective money supply is shrinking, the Fed can inject as much new money into the system as it wants without having to worry about inflation. The last beige book (released today) actually mentioned deflation as a serious worry. The Fed is going to keep the printing presses going.

Only the "S&L Bailout" and "New Deal" were comparable in this sense, and the New Deal was before Keynsian economics showed us how the money supply interacted with goods markets. And the S&L crisis was cut short for moral hazard reasons. If it was thought to drag down the economy as a whole, you better believe they would have kept printing.

So anyway, the extra $700 billion on the Federal Debt only becomes a problem when international investors stop seeing the US as the safety beacon that it is. As long as the rates on that debt stay low, the budget and trade deficits will likely persist.

If something happens to worry the world, however... tighten your belts, America.

(And no, I'm neither defending nor deriding the current bailout plan -- I'm just interested in the metrics.)

Stop the fucking madness.

I would only consider the Vietnam War and the S&L crisis to be negative, with the Korean War being a neutral advancement of the Cold War conflict. As for the benefits of the Iraq War, we'll see, but I continue to believe that the war, while poorly executed at times, will make for a brighter future in the Middle East, as it already has begun to. Moonshot/NASA -> countless technological advancements non necessarily related to lunar or space exploration. I'm OK with the New Deal in that it produced immediate results in a situation far more dire than the current one, just not OK with the fact that its organizations were not sunsetted, which does not diminish its original utility, just its structure. My disdain for the bailout is perfectly consistent with the view, as the present economic situation is completely different from that which existed in the 1930s, no matter how much the alarmist media would like us to believe otherwise.

Wow @ the Louisiana purchase cost.

I'm glad the US is still in the business of taking things from brown people.

1. Does this mean the government is admitting stimulus checks don't work?
2. Why is a better way to pay off our debt to give the companies we owe money to $20,000 per person to keep us in debt instead of giving us the $20,000 to get us out of debt?

If your cognitive dissonance could be harnessed in a 6-cylinder form, America's gas dependence would be solved overnight.

@Michael Belisle: Well, he did say "mostly" and if you look at the technologies that your using today, alot of them were developed and used in the moon race, and if not for those needs then, you probably wouldn't have them, or probably wouldn't have them nearly as cheap as you do now. So 5/9 is more than half, so technically is mostly.

I just threw up in my mouth.

Thanks, Government. I didn't know I could hate anything this much.

Invest in me. Nothing fancy, like $25,000, right? Give me $25,000 and I *promise* you that you'll see an economic impact in my local economy as soon as the next time I get paid.

You can toss money away at these companies and just hope you get a return or invest in me and *know* you'll get one.

Hell, I'll even pay $5,000 in extra taxes over the next year. You can't lose.

AIG was $85 billion, banking bailout is $700 billion, automakers bailout (loan/gift) probably gonna be $25 billion...

That is only $810 billion. How in the hell are they getting $4.6 TRILLION? (knock knock) Hello?

Okay, but it isn't indexed to GDP.

That's the other half of this ball of wax.

Please note the very high cost and the lack of inclusion of the Freddie and Fannie portfolios. The total is pushed higher with an auto maker bailout. True, at the moment, $4.6T seems a bit high, but considering the government is prepared to spend in excess of $8.5T, I think Ben's point still stands.

Please research a bit before you start in with the name calling, yes?

Do you really think there's anyone that is against the war specifically and solely because of how much it costs?

"Yes, these numbers are inflation adjusted."

So, I think the answer is, "Yes, these numbers are inflation adjusted."

You see, I'm just not sure what massive benefits the Vietnam, Korean, and Iraq wars, walking on the moon (as awesome as it was), and bailing out the S&Ls bestowed upon us. Opponents of the bailout would probably argue against the New Deal, so we can strike that one too.

Besides, money isn't real. If you look at the current bailouts closely, the sleight of hand is revealed.

It's actually bloomberg's high horse. They have a breakdown of what the taxpayer is on the hook for here:

[www.bloomberg.com]

It shows the total commitment, as well as what's been spent.

I won't beat a dead horse about the fact that we won't see this money, but I will correct what may be construed as a typo... "... IF(!!!) they start making money again..."

As with all investments, there is a potential for loss in the form of risk.

Cant we just give $1T to NASA and say "Here, take up the Venus fly-by you planned in 1974 and take us to Mars on a reactor-driven ship." Anyone?

@AtomicPlayboy: The economy is certainly in dissaray, and something needs to be done. But as Atomic points out, we need to find a solution where the cost is dwarfed by the payoff. Does anyone really believe this will be the case with this corporate bailout?

The difference between NASA, the Race to the Moon, and the New Deal -- and the current spending frenzy -- is that the former projects put up money which DIRECTLY affected the populace by spurring inovation and hiring people for important jobs. I have seen no evidence that says the financial institutions won't just use this cash to sure up sagging profit margins & repeat the same mess again in a decade...

So, maybe my math sucks, but assuming there are about 140 million taxpayers in the country, 4.6 trillion works out to about $33,000.00 per taxpayer, or about 15,000.00 for every man woman and child in the country. It's just a staggering number.

[bonddad.blogspot.com]

@Bladefist: That's stupid. I hate the Iraq war AND I hate the "bailout". Happy now? The two are not mutually exclusive.

The GOVERNMENT will get all this money back (maybe) and we won't see a cent.

As an astro grad student, I've been 4 times already. Not too bad a perk.

it's amazing to me how people just accept a number thrown out ($4.6 T) without questioning it.

I already knew that this bailout was the proverbial waste of good money after bad, but now that I see the historical context, I'm even more disgusted.

@evilfremen: Seriously! Thomas Jefferson kicks so much ass.

1. WMDs
2. Osama Bin Laden

And my statement was meant to be humorous.

The right way to compare is as percentage of GDP (just like deficits). Also - th $4.6 T number is potential commitments, not spent funds - not fair to compare to solid numbers from the past.

We didn't actually buy Louisiana. The French agreed to give up their claim to the land for the money.

We still had to go in and take it from the people who actually owned it.

It costs more than:

the Marshall Plan, the Louisiana Purchase, the Race to the Moon, the S&L Crisis, the Korean War and the New Deal. Not really a lot of value for the money in comparison, don't you think?

@Bladefist: Agreed! That made me hate it even more.

Where did the 4.6 trillion dollar figure for the current bailout come from, exactly?

Seriously, the number of variables involved in hiring and regulation are FAR greater than the number of variables involved in a moon landing.

And punch them all in the face for good measure. They need it.

Thus ends my daily pissed-off rant.

Imagine the ripple effect in our economy had we decided to let all these companies to fail and just deal with it. Not only would jobs vanish but also even more people would stop buying which would continue the downward spiral. It may have taken several decades to recover where as now, we may recover in a few years.

Nobody wants to have to spend this kind of money, but it's the lesser of two evils, the alternative would have made the great depression look like a picnic.

Frankly, I am just amazed how cheap the Louisiana Purchase was. How about we find some more great deals like that one instead. The point above about the assumption of debt is valid. But I think its important to remeber what we got in return for these other investments. Territory, international stability, new technologies and prestige, compared with assuming bad debt, isn't really a good trade off. Seems like the only one that was a worse waste of money was Vietnam.

If we didn't back up these companies, their collapse would take the remainder of the US economy with it and it would take us decades to climb out of the hole. That's exactly what happened in Japan when their "bailout" came about a decade too late.

Unfortuantely, our economy would not work without AIG, Citigroup, etc...They are key players that cannot fail and as taxpayers, we're left to pick up their pieces.

All of that said, the government STILL shouldn't be assuming private debt in order to erase responsibility for mistakes that it, banks and consumers all allowed to happen.

I think I'm going to be sick....