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Big Bailouts, Bigger Bucks

Posted By Barry Ritholtz On November 25, 2008 @ 7:19 am In Bailouts,Markets,Taxes and Policy | Comments Disabled

Whenever I discussed the current bailout situation with people, I find they have a hard time comprehending the actual numbers involved. That became a problem while doing the research for the Bailout Nation book [1]. I needed some way to put this into proper historical perspective.

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:

Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

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data courtesy of Bianco Research

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That is $686 billion less than the cost of the credit crisis thus far.

The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).

Go figure: WWII was a relative bargain.

I estimate that by the time we get through 2010, the final bill may scale up to as much as $10 trillion dollars…

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UPDATE:  November 25, 23008 10:34am

A few additional details:

-Well regarded Jim Bianco did the number crunching. The easiest method is to recalculate the numbers using  CPI data.  There are other ways to depict this — such as percentage of GDP, or on a per capita basis, or in terms of costs of common items (eggs, bread, big macs, etc.).

Bloomberg [2] calculates the total amount the taxpayer is on the hook for is $7.76 trillion, or $24,000 for every man woman and child in the country. (Data breakdown is here [3])

Regardless, no matter you calculate it, we are talking about an ungodly amount of money.


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2008/11/big-bailouts-bigger-bucks/

URLs in this post:

[1] Bailout Nation book: http://www.amazon.com/exec/obidos/ASIN/0071609059/thebigpictu09-20

[2] Bloomberg: http://www.bloomberg.com/apps/news?pid=20601109&sid=an3k2rZMNgDw&

[3] Data breakdown is here: http://www.bloomberg.com/apps/data?pid=avimage&iid=i0YrUuvkygWs

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