Small Business & Entrepreneurship Council | Raymond J. Keating | September 26, 2008
When it comes to tallying up the federal government’s recent bailout announcements, the numbers are so staggering that they might seem unreal to many people.
For Bear Stearns: $29 billion.
For Fannie Mae and Freddie Mac: $200 billion.
For AIG: $85 billion.
And now, of course, Washington debates Treasury Secretary Hank Paulson’s $700 billion to bailout financial firms that made bad debt decisions.
That’s $1.014 trillion in taxpayer money placed at risk. (And there’s the $25 billion loan package-bailout moving through the Congress for automakers.) Unfortunately, since there is no substantive analysis to back up the $700 billion the Treasury wants, the bill may go even higher.
But let’s take $1 trillion as the number for now, and put it in perspective. For example:
• That $1 trillion equals 7 percent of the annual U.S. GDP.
• That $1 trillion comes out to nearly $3,300 for each man, woman and child in the U.S.
• That $1 trillion roughly equals the nonfarm proprietors’ portion of total personal income.
• That $1 trillion equates to more than 70 percent of after-tax corporate profits.
• That $1 trillion equates to about 70 percent of private nonresidential fixed investment.
• That $1 trillion is more than three times the expected level of corporate income tax revenues for fiscal year 2008.
• That $1 trillion comes up just short of the $1.17 trillion expected to be taken in through the personal income tax in FY2008.
• That $1 trillion is about $100 billion more than the expected FY2008 revenues for Social Security.
• That $1 trillion is 65 percent higher than the federal government will spend in FY2008 on national defense.
Hope that helps to put this entire government bailout scenario in perspective.
Raymond J. Keating, Chief Economist