A quick note to let everyone know that I have updated some financial figures on “The Real cost of the Bailout.” You will be stunned when you see how this thing is spiraling out of control.
A number of people have asked me to document how we have spent over $4 trillion in bailout money. Turns out, the graphic below was a snapshot of bailout money and now the total has risen to almost $7 trillion. I believe the final total may top $15 trillion. Of course, I said all this months ago but it feels somewhat good to say, “I told you so” to some folks.
1. See the figures below.
2. Bloomberg estimates that the Federal Reserve has spent $3 trillion and pledged $5.7 trillion which would make the total bailout over $12 trillion.
3. I was on a radio program with Congressman Steve Pearce (R-NM) recently and he confirmed that trillions are being spent without approval of Congress.
Financial Crisis Balance Sheet
|Government Entity||Sum in Billions of Dollars|
|(TAF) Term Auction Facility||900|
|Discount Window Lending|
|Loans to buy ABCP||76.5|
|(TSLF) Term Securities Lending Facility||225|
|(MMIFF) Money Market Investor Funding Facility||540|
|Commercial Paper Funding Facility||1800|
|(TARP) Treasury Asset Relief Program||700|
|(FHA) Federal Housing Administration||300|
|Fannie Mae/Freddie Mac||350|
|TARRA – The American Recovery and Reinvestment Act||787|
*References includ US National Archive, US Dept of Defense, US Bureau of Reclamation, Library of Congress, NASA, Panama Canal Authority, FDIC, Brittanica, WSJ, Time, CNN.com, and a number of other websites.
Something they don’t teach at Business School (or in Washington).
Our Tax System Explained: Bar Stool Economics
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers,’ he said, ‘I’m going to reduce the cost of your daily beer by $20.’ Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.
But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I got’
‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
HT to Lisa
The Dow Jones Average has experienced the largest two day drop since 1987, reminding us that our financial troubles are far from over. Jobless claims and a shrinking economy have crushed earnings reports and stock prices. Overnight, Japan was down 6% and European stocks were down 5-10%. Russia is in trouble and China is not doing well.
Exxon, Cisco, Kroger, Tyco, GM, Intel, Blackstone, Amazon, Wells Fargo, all down. If President-elect Barack Obama has a plan for all this, now is the time to speak up since “change has come to America.”
Of course, many, including me, predicted that since Obama was part of the cause of our economic turmoil that his eleection would not solve the problems. Rather, electing Obama would deepen the problems.
It turns out that people on Wall Street are quite intelligent. The masses may have believed the lie that George Bush and John McCain were responsible for this mess but the smart folks know better. They can also read the tea leaves and predict the impact of “Spread the Wealth” on the economy and the impact of raising taxes on corporations.
By the way … will someone give the Obama leadership a basic lesson in macro-economics. American corporations has one of the highest tax rates in the world. When taxes increase, companies move jobs overseas and increase prices at home, passing the cost along to the consumer. If they cannot pass along the costs, companies delay hiring and/or lay off workers. Hmmm. Higher prices and fewer jobs result from increasing taxes on companies. Not sure that is what we want from a President.
In a recent television ad, Barack Obama claims that family incomes are falling:
“For eight years, you’ve been told that the way to a stronger economy was to give huge tax breaks to corporations and the wealthiest Americans, and somehow prosperity would trickle down. Well now we know the truth. It didn’t work. Instead of prosperity trickling down, pain has trickled up. Working family incomes have fallen by $2,000 a year.”
According to the Tax Foundation, that is not actually true. They go on to say it is “not even in the ballpark.”
Real incomes for working families have not even fallen by $2,000 in the entire eight year period of the past eight years, according to the Census Bureau; and that’s even judging by an income metric (cash money income) that doesn’t include in-kind benefits like the value of employer-provided health insurance. . . .
…median family income in 2007 (most recent year data is available) was at an all-time high, and mean working family income (which can be skewed by very high income earners) has actually only fallen by about $348 in real terms since 2000. The latter implies an average decline of about $50 per year, meaning Obama is overstating the decline by about forty-fold.
I realize that in any campaig, both parties make claims that are disputed by their opponents. One role of the media is to fact-check these claims/accusations and report the truth.
Sadly, the mainstream media is embedded so deeply in Obama’s hip pocket they refuse to analyze an outrageous accusation such as this one.
Don’t expect the MSM to call attention to the fact that this ad by Barack Obama and the Democrats is an outright lie.
Yesterday, McCain blasted Obama and the Democrats for the mess we are in. How does the LA Times cover the story? They pretended he never said anything about the economy!
The Democrats have been denying that they are the primary cause of the Fannie and Freddie fiascos. Even Bill Clinton admits that there needed to be greater regulatory controls and key Dems consistently fought against them. Listen to Cal Thomas:
When Speaker Nancy Pelosi took to the floor of the House on Monday to blame Republicans for the financial turmoil and charge them with a laissez-fare attitude toward regulation, it seemed like a calculated effort to shift attention and accountability from what Democrats have done to create the current conditions. Fortunately, we have YouTube.
At a 2004 hearing of the Government Sponsored Enterprises Subcommittee, then-Chairman Rep. Richard Baker (R-La.) predicted the collapse of Fannie Mae if nothing was done. Baker called for more regulation, something Democrats claim Republicans never wanted. In an editorial Tuesday, The New York Times got it wrong when it accused Republicans of engaging in “free markets-above-all ideology.” That just isn’t true. President Bush was calling for more oversight of Fannie Mae and Freddie Mac in his first year as president, though he also praised efforts to expand minority home ownership at a time when bad credit risks were straining the system.
Read the rest of the article – WORLD Magazine
I am ready to Kill the Bailout
Right Voices is on target again with a collection of quotes from Dems – In Their Own Words
If Congress is trying to find ways to fund a bailout, perhaps they should start with the Omnibus Spending Bill.
Senate leaders wringing their hands over where to find $700 billion for the Wall Street bailout might start with the fine print of the omnibus bill: The measure includes more than $6.6 billion in pork-barrel spending.
The 2,000-plus earmarks fill 752 pages attached to the 357-page spending bill. Sen. Ted Stevens, notorious for his huge earmark requests, scored the largest haul—some $238.5 million in earmarks.
In the U.S. House, Rep. John Murtha (D-Penn.) brought in the most earmarks—more than $111 million, including $24.5 million for the National Drug Intelligence Center, an organization critics say is rife with mismanagement.
Democrats rushed the spending bill to the floor on Wednesday, giving Republicans and outside watchdog groups only a few hours to review the measure before a House vote. Critics complained that the process lacked the transparency for earmarks that Democrats promised when winning the majority in the House. But with the nation riveted by the Wall Street crisis, the spending bill and its earmarks made few ripples before passing with bipartisan support.
95 Democrats voted against the bill.
Quit blaming John McCain for failure to keep your majority, in the majority.
Take a look at these articles –
Bill Dyer at Townhall – Elections have Consequences
Hugh Hewitt – Duplicity and Cynicism
Michelle – The Crap Sandwich
Hot Air – Bailout Bill Fails After Pelosi Speech
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