Nov 26, 2008

Ev Dirksen was a Piker

by Cliopatria

Senator Everett Dirksen (R, Ill.) was one of the more colorful members in the history of the United States Senate. A fiscal conservative, he is commonly remembered for having said:"A billion here, a billion there; soon you're talking about real money." Dirksen could not have imagined the magnitude of the bailout to which the United States is already committed. Barry Ritholz,"Big Bailouts, Bigger Bucks," The Big Picture, 25 November, puts it this way:

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
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).

A trillion here, a trillion there; ....

More Comments:

Ralph E. Luker - 11/27/2008

Jeff, I can't account for the disparity between your estimate of adjusted cost of the Marshall Plan and the figure reported by Ritholtz. I hope you disputed it at his site. On the other hand, we really know very little about the agreements between federal authorities and the bailout recipients. We're told that these are loans, but British authorities have apparently driven much tougher taxpayer-interested arrangements.

Jeff Vanke - 11/26/2008

As a percentage of GDP, the Marshall Plan was about $630 b, not the mere $115 b inflation-adjustment. And as a percentage of disposable income, the figure would go even higher.

Also, current US pledges of $4.6 trillion (today's NYT reports over $7tr) are in large part through loans and co-signatory guarantees. In accounting terms, those are not costs unless they become permanent losses, which we have no reason to believe they will (or not most of that sum anyway).

None of the expenses on Bianco's list were loans -- they were permanent losses. By way of contrast, the savings and loans potential loss was once estimated at over $500 billion -- the holdings value of failed institutions, c.1990 dollars. *Actual* taxpayer losses turned out to be $124 billion (the remaining $29b was borne by the savings & loans and private insurance).

Ralph E. Luker - 11/26/2008

I think your friend is probably right, Sherman.

Sherman Jay Dorn - 11/26/2008

According to a friend who tried to track down the source of the aphorism attributed to Dirksen, there is no published source.