Other People's Money-Bailout Mania

Other People’s Money: Bailout Mania

In the consulting world, a baseline maximum is:  “If you have a problem that can be solved with money, you don’t have a problem, you have an expense.”   But at what point is the spending of money the problem itself?   

Let’s look at other US Government programs, wars and social programs, in terms of their “inflation adjusted” costs in 2008 dollars.      On the American Thinker www.americanthinker.com    author Ethel C. Fenig lays out the cost of big government programs (wars, social programs, bailouts), based on research from the Jim Bianco, who works at the Arbor Research & Trading, Inc.    For more info  www.arborresearch.com    Who is the Bianco Research Service
?  Bianco Research specializes in investment research for the professional and institutional investor. Using "macro" analysis of the fixed income, equity, and commodity markets as a foundation, Bianco Research provides unique insights into the markets.   So what did Jim Bianco research show on these US government expenditures?

            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 (italics added) 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 of historical US Government programs, wars and bailouts: $3.92 trillion

So just how much is the US and it’s G-20 partners spending on the massive bail out of the financial system mess?      The liberal leaning climate change advocacy Institute for Policy Studies has a new report out that estimates the cost is over $4 trillion dollars!  “The approximately $4.1 trillion that the United States and Europe have committed to rescue financial firms is 40 times the money they're spending to fight climate and poverty crises in the developing world,” according to the recent report released by ISP   www.ips-dc.org/articles/913

Why would a group like the ISP be concerned about spending Other People’s Money?    Their concern is not from a conservative perspective of fiscal responsibility, but because the US and it’s G-20 partners are spending it on bailing out financial markets, not on climate change or global poverty.  

            Others estimate the spending binge and commitments by the US Government are even higher than $4 Trillion.   Deroy Murdock, writing in Human Events www.humanevents.com estimates that the US Government spending, loan guarantees, commercial loans and other financial bail out actions may total $8 Trillion before the spending spree is finished.

            “As president, neither Al Gore nor John Kerry could have gotten away with such aggressively socialist policies as the allegedly “conservative Republican” Bush administration’s dizzying parade of massive outlays, fiscal injections, equity purchases, mandatory subsidies, and even nationalizations.

These and other new commitments -- totaling a mind-blowing $8.347 trillion and counting -- assume that Washington should pump money into the economy. But it cannot do so without sucking money from the economy. Uncle Sam cannot spend a dollar without first extracting it from taxpayers or lenders, or by printing it in order to spend today the purchasing power that inflation will demolish tomorrow.”  Deroy Murdock, 11.28.08

            The United States estimated Gross Domestic Product (all economic activity for the nation combined) is $14.8 trillion for 2008.   See the web site the Financial Forecast  www.forecasts.org/gdp.htm  for details on the GDP forecast.   To put the financial bail out and massive spending being originated in Congress and the US Treasury in context, it is more that 50% of the total US gross domestic product.    The total US tax revenues (collected for 2006) totaled $2.5 trillion dollars, of which 44% ($1.3 trillion) was collected from individual’s income taxpayers.

            So the massive bailout of 2008, orchestrated by the Democrat controlled US Congress and an outgoing “lame duck” president will be paid for by the US taxpayer in form of higher taxes (as Barack Obama has promised), increased US debt and inflation from money being printed to cover deficit spending.  Whatever the method, the spending in the Washington DC is out of control.    And the incoming Democrat Congress and new Democrat President has said we’ll put a hold on reducing US Government debt and spending until the US economy is back on track.   Huh?   

            Once again the temptation for politicians at all levels, especially those in Washington DC, to spend Other Peoples Money is too easy and too great to resist.   It’s probably a good time to buy some gold, save some money and avoid more personal debt.    We could be in for some wild financial times, given the spending spree in Washington.

© 2008, Four Corners Media, Jasper Welch    www.jasperwelch.org

Other Peoples Money: Let's Just Soak the Rich 10.13.08

Other People’s Money (OPM) is always easier to spend than your own money.  And tax spenders (most of those in Washington, your State Capital or your local City or County government) are always looking for ways (called programs, rescues, infrastructure, or public works) to spend OPM on their projects.   And since, through the election process, these tax spenders were elected, the taxpayer is expected to just stay calm as the OPM (your hard earned tax money) is spent.   But if the tax spenders (particularly those in Washington DC) can change the terminology by using words such as “a next tax cut” or “refundable tax credits”, then the taxpayer may think that the check they could receive or the tax cut they may enjoy, will cost nothing and everything will be fine.  This is what Senator Obama is promising, as he seeks to buy your vote with other taxpayers money.

Warning:  Overspending in Washington will lead to a) new taxes, b) additional Federal debt, c) less of your money due to tax increases and/or higher interest rates.   Warning:  Taxing the rich is the Democrat mantra, being chanted by Obama and his legions of believers, coupled with a mythical “tax cut” for 95% of Americans.  This tax spender slight of hand would appear to most taxpayers as a good deal on the face.  But turn over the coin and what is on the other side? 

            In the Wall Street Journal  www.wsj.com  on the Opinion Page of October 13, 2008, the following appeared:

“The Tax Foundation www.taxfoundation.org  estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.” 

            To quote the Tax Foundation (Obama’s Redistribution Plan, Fiscal Note #132, June 25, 2008): “In short, the Obama plan would redistribute more than $131 billion per year from the top 1 percent of taxpayers to all other taxpayers. In 2009, for example, Tax Policy Center figures show that after the income shifting in the Obama plan, the top 1 percent of taxpayers would pay a greater share of the total federal tax burden than the bottom 80 percent of Americans combined. In other words, 1.13 million Americans would pay more in all federal taxes than 128 million of their fellow citizens combined.”

Blogger note:  According to the liberals this is “fair taxation”.   In the opinion on this conservative, this Obama plan is “redistribution of wealth”.   Key those words into Google www.google.com  and see what other words come up:  Marxism, Communism and South Africa.    America or economic prosperity doesn’t appear.

            But aren’t those rich people idle ladies and gentleman, that according to Senator Biden have a patriotic duty to pay more taxes?   While “taxing the rich” makes for good class warfare rhetoric, it also makes for poor economic and tax policy.   In 2004, small business owners paid 54% of all individual income taxes.   So the “soak the rich” approach to tax policy ends up taxing small businesses, who create most of the new jobs in America.   These are the same small businesses that risk their time, money and effort to build the US economy and create jobs, one small business at a time.  

            To offer straight talk to the American taxpayer: Increasing the Federal income tax rates for the highest income tax payers (top 5%), and “redistributing the wealth” the rest of the tax payers is call socialism.  Giving checks to those who pay no Federal income taxes is called welfare, not a tax cut.  Increasing individual tax rates on top 5% of income earners, increasing capital gains taxes on investments and keeping US corporate taxes the 2^nd highest in the world is a recipe for slowing US economic growth, reducing new job creation and reducing owners and workers compensation.   But what the heck, it is just “Other People’s Money”.   

(c) 2008,  Jasper Welch, Four Corners Media   www.jasperwelch.org