Value of 2008 Bailouts Exceeds Combined Costs of All Major U.S. Wars
(CNSNews.com) – The total value of the bailouts undertaken by the federal government in 2008 now exceeds the combined cost of every major war the United States has ever engaged in, according to a comparison of war costs calculated by the Congressional Research Service (CRS) and the value of the bailouts as calculated by Bloomberg News or Bianco Research.
According to CRS, all major U.S. wars (including such events as the American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan, but not the invasion of Panama or the Kosovo War), cost a total of $7.2 trillion in inflation-adjusted 2008 dollars.
According to Bloomberg, the federal government has made commitments worth a total of $8.5 trillion in the bailouts of 2008. That includes actual expenditures as well as loan and asset guarantees.
Bianco Research puts the total value of the bailouts at $8.7 trillion.
In this Sept. 23, 2008 file photo, the amount of U.S. national debt on Sept. 23 is shown on the National Debt Clock in New York. (AP Photos/Bebeto Matthews, file)
The $296 billion spent on World War II, America's most expensive war, would be $4.1 trillion adjusted to today's dollars, according to the CRS report from June.
The adjusted cost of the Civil War would be $60.4 billion for both the Union and the Confederacy combined. The inflation-adjusted cost of the Vietnam War would be $686 billion. The cost of the current Iraq war up to last June was $648 billion, while the adjusted cost for Afghanistan to that point was $171 billion.
The total cost of the American Revolution was a relatively inexpensive $1.8 billion.
"World War II was financed by savings, the American people's savings, when Americans bought war bonds," said Olivier Garret, CEO of Casey Research, who analyzed the value of the bailout compared to the major U.S. wars and other major historical government expenses. "Today, families are in debt and government is in debt."
In this Sept. 25, 2008 file photo, Dara Blumenthal, of Brooklyn, holds up a sign during a rally against Wall Street bailout in front of the New York Stock Exchange in New York. (AP Photo/Mary Altaffer, file)
A Bianco Research report cited in Politico puts the number for the total value of bailouts at $8.7 trillion and also affirms the value to be higher than the cost of all American wars and historic initiatives. A spokesman with Bianco Research could not be reached for comment as this story went to press.
The bailouts, led by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, were taken as emergency actions to keep U.S. companies from going under and to prevent a total financial markets meltdown in the United States. Similar bailouts were issued in other countries to address the global financial crisis.
The Bush administration is mulling whether to use some of the $700 billion in TARP funds approved by Congress to bailout the financial industry to bailout U.S. automakers.
The bailouts could put U.S. taxpayers in a tough spot in the future, said Pete Sepp, spokesman for the National Taxpayers Union.
"I'm assuming the figures do not include the Cold War defense expenditures, which would probably amount to several trillion on their own," Sepp told CNSNews.com. "In any case, it's a stark illustration of just how quickly the federal government has gotten into a huge financial hole and dragged taxpayers into it in the process."
"We can only hope and pray that many of these liabilities and guarantees and commitments the government has made will not have to be made good on," Sepp said. "If we were to be responsible for paying out all of these obligations, even in the period of one or two years, it would be financially disastrous to the government's credit rating and our own as taxpayers."
Garret pointed to the cost that will be paid by Americans in the future. "Future generations of Americans are going to continue to finance the enormous amount of debt," he said.
Unemployment Hits 7.2%, 16-Year High
U.S. Loses 524,000 Jobs in December
December’s job losses brought the total for 2008 to 2.6 million, and a rapidly deteriorating economy promised more in the months ahead.
The unemployment rate jumped to 7.2 percent in December from 6.8 percent in November and 5 percent last April, when the recession was four months old and just beginning to bite. More than 11 million Americans are now unemployed, and their growing ranks seem likely to put pressure on President-elect Barack Obama and Congress to act quickly on a stimulus package that mixes tax cuts and public spending.
“These numbers, back to back, of more than a half million a month suggest that the U.S. economy is in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight. “It’s scary, and it indicates that unless something is done and done quickly to turn this economy around, we’re looking at an awful situation this year.”
On Wall Street, the markets fell on the report, with all three major exchanges down more than one percent.
The 7.2 percent was the highest unemployment rate since January 1993, when the country was still shaking off a jobless recovery from the 1990-91 recession. The loss in total jobs for 2008 was the largest since 1945.
The toll of job losses cut across every sector. Nearly 800,000 manufacturing jobs were lost in 2008, and 630,000 construction jobs disappeared as home-building slowed. Jobs dried up in the financial sector, in publishing houses and trucking companies, department stores and hotels.
“This is unprecedented,” said Mark Zandi, chief economist of Moody’s Economy.com. “It’s coast to coast. It’s everywhere. There’s really no refuge in this job market. There’s no safe place.”
“Even with a stimulus package, the unemployment rate is going to keep rising and by December it is likely to be over 9 percent,” said David A. Levy, chairman of the Jerome Levy Forecasting Center. In a speech on the economy, Mr. Obama said Thursday that the unemployment rate “could reach double digits.”
The accelerating job loss — more than one million jobs have disappeared in just two months — suggests that the recession will last at least into early summer, making it the longest since the 1930s. The severe recessions of the mid-1970s and early 1980s each lasted 16 months, the current record.
In his speech Thursday at George Mason University, Mr. Obama said that his American Recovery and Reinvestment Plan would “immediately jump-start job creation and long-term growth.” Most forecasters, however, say that even with an ambitious stimulus plan, the economy will continue to contract through the first half of the year, though at a slower pace — and even if a recovery does kick in by early summer, it won’t generate jobs for many months after.
“I would suspect that starting this past October and lasting through April, we will have really big job losses,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm.
Just in October and November, 956,000 jobs disappeared (the November loss alone was 584,000, revised from 533,000), the Bureau of Labor Statistics reported. That was nearly 40 percent of the jobs that were eliminated since the recession began in December 2007.
“There was a change in psychology around the time the financial crisis devolved into a panic in September or October,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses went from trying to hold on to their workers to laying them off in an effort to survive.”
Since then, consumer spending and business investment have fallen precipitously and lenders have been reluctant to supply the credit that would be needed to lift private sector demand. In addition, demand is not likely to revive until consumers become more confident about the economy. Their confidence is at record low levels, several polls show.
But for all the job losses, the current recession, now in its 14th month, falls short of the mid-’70s and early ’80s recessions, at least so far. The total number of men and women at work declined 2.7 percent in the 1974-75 recession and by 3.1 percent in 1981-82. In the current recession, the loss through November was under 2 percent.
“We are not yet near the numbers of those earlier recessions,” Mr. Barbera said, “but five more months like what we have been having and we’ll be there.”
An earlier version of this article misstated the previous time that the unemployment rate was this high. It was 7.3 percent in January 1993, not 1994, making the current rate the highest in 16 years, not 15. The net job loss for 2008 was also misstated. It was 2.6 million, not 2.4 million.
By LOUIS UCHITELLE
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