RALEIGH Ė Itís not every day that one gets to be present at the birth of a new nation. So congratulations are in order to everyone whoís currently paying attention to the unfolding mess in Washington. Theyíll be able to tell their grandchildren all about it.
All about the birth of Bailout Nation.
Its progress from conception to arrival can be told in a few numbers Ė though the numbers are vast and contain multitudes. The first is, of course, $700 billion. Thatís the original size of the Troubled Asset Relief Program, or TARP. When Republicans in the U.S. House voted down the first version in October, the Dow Jones Industrial Average dropped several hundred points. To stop the panic, Congress enacted the TARP. The Dow then dropped several thousand points. Panic averted, obviously.
I suggest a change in nomenclature: the Troubling Return of Asinine Policy (TRAP). Or, given the Bush administrationís plans to tap the account for an auto-industry bailout, perhaps the program should be renamed Troubling Willingness to Embrace Rampant Political Stupidity (TWERPS).
If $700 billion feels inadequate to capture the Brobdingnagian scope of the moment, try $1.9 trillion. Thatís the current estimate of how much the Federal Reserve system has committed to bailing out the borrowers, employees, and bondholders of financial institutions. Itís okay, though. The Fed has unlimited money to spend, courtesy of the magical properties of central banking. Good thing all these loans and guarantees wonít cost you or me anything.
Not that taxpayers have been left out of the mix. The U.S. Department of Housing and Urban Development has set aside $300 billion in tax dollars to help bail out mortgage borrowers facing foreclosure. Thatís okay, too, because if the mortgage crisis continues to spread and the government-run Fannie Mae and Freddie Mac comply with new congressional mandates to expand their purchase of mortgage-backed securities, weíll just be giving money to ourselves so that we donít default on big loans to ourselves.
The next number is bigger still: $3 trillion. Thatís an estimate of the amount of assets in money-market funds that the federal government has offered to guarantee. The whole amount is unlikely to be required, actually, but if things get markedly worse, itís a reminder how much exposure there might be.
Finally, a big unknown: the size of the incoming Obama administrationís proposed package of fiscal stimulus. Reportedly it will include massive new federal spending on roads, transit, schools, swamp-draining projects, swamp-creating projects, windmills, treadmills, and unicycle-sharing programs. The talk is a two-year package totaling between $600 billion and $1 trillion.
But again, thereís no reason to hyperventilate about it. You wonít be paying for it. I wonít be paying for it. The government is paying for it. All those billions of new dollars will flow through our seized-up economic engine, providing lubrication and fuel for a New Economy speedster the likes of which have never been seen before.
Your grandkids will hang on your every word as you tell the tale of how you were there when Bailout Nation was born. Having inherited trillions of dollars in new debts to finance all this blather and nonsense, theyíll take their entertainment any way they can.
Hood is president of the John Locke Foundation