Out of Control Policy Blog

How much have we spent? The next generation of market paternalism begins to take the reigns

Obama's first press conference today highlighted a few of his economic priorities:

  • A new stimulus package for the economy. This doesn't come as much a surprise, he has previously advocated for another stimulus package around $175 billion.
  • An extension of unemployment benefits.
  • Make auto industry a priority.
  • And thus it begins, a new era of market paternalism and new progressivism. Bring on the Brand New Deal, Keynesianism, and pseudo-socialism are back in vogue.

    In reality, these policies of market paternalism aren't much different from the outgoing administration. Obama's call for more unemployment benefit spending was mirrored by President Bush today. We've already handed out cash from the Treasury a couple times under Bush. And the auto industry has already received special treatment from the GOP-led executive office as well.

    Recently, The Big Three, soon to be come The Big Two, began asking for an additional $50 billion. Note that they got $25 billion in September to cover increased costs of meeting the CAFÉ fuel efficiency standards. And GM has asked for $10 billion so it can buy Chrysler. This money would be $25 billion to cover healthcare costs, and $25 billion for general liquidity issues.

    Just a few months ago it seemed like we operated on a general principle in America: if you couldn't make enough money to cover your costs, then you went out of business. But now with unemployment at 6.5%, the argument is that jobs are so critical we must protect our industries. Keep in mind that this is how Europe operates and they are over 10% unemployment... so, maybe the logic isn't right.
    To get your blood boiling a bit, here is some news from MSNBC on how the bailout money has been spent thus far:

    "As if the economic bailout by U.S. taxpayers isn't enough to make you sick to your stomach, new information has come to light that several banks are planning to pay billions of dollars in year-end bonuses from the bailout funds they received. Investigations are beginning into the nine banks that took in the first $125 billion -- the same $125 billion that was supposed to be used to unclog the credit system which was preventing banks from providing much needed funds for individuals and businesses."

    And don't forget that lovely $440K that AIG spent on a spa for sales people.

    Lets recap the amount of money spent thus far this year. A word to the wise, get some duck tape to wrap around your head, cause these numbers all together is gonna make it explode... if it hasn't already:

  • $29 billion for Bear Stearns
  • $143.8 billion for AIG (thus far, it keeps growing)
  • $100 billion for Fannie Mae
  • $100 billion for Freddie Mac
  • $700 billion for Wall Street, including Bank of America (Merrill Lynch), Citigroup, JP Morgan (WaMu), Wells Fargo (Wachovia), Morgan Stanley, Goldman Sachs, and a lot more
  • $25 billion for The Big Three in Detroit
  • $8 billion for IndyMac
  • $150 billion stimulus package (from January)
  • $50 billion for money market funds
  • $138 billion for Lehman Bros. (post bankruptcy) through JP Morgan
  • $620 billion for general currency swaps from the Fed
  • Rough total: $2,063,800,000,000
  • Yes, over $2 trillion dollars. That $8 billion for IndyMac doesn't even seem big anymore. Oh, and keep in mind that this doesn't include the hundreds of billions the fed has and will buy up in commercial paper and lend out to other financial firms. The deficit is nearly $440 billion this year, and the national debt is $10.5 trillion. If these numbers don't shake the next Congress into becoming more fiscally responsible, nothing probably will.

    Anthony Randazzo is Director of Economic Research


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