According to an analysis by CNBC, "Financial Crisis Tab Already In The Trillions" , the financial bailout tab already stands at $4.28 trillion and counting. That's about 20 times the cost of the Louisiana Purchase (adjusted for inflation), and more than anything else CNBC could come up with, including World War II, which cost $3.6 trillion by their estimate. They have a slideshow of "Big Budget Events" here.
However, they overlooked the obvious: our spending on nuclear weapons from World War II forward was estimated at $5.5 trillion in a Brookings Institute Study completed in 1998 (summarized most recently here). Adjusted for inflation, that's roughly $7.2 trillion in 2007 dollars. Total military spending over this same time period amounted to $22.8 trillion. Still, that's $22.8 trillion over half a century. Bush ran up $4.28 trillion in a matter of months.
The numbers are so staggeringly big that one really does have to use these sorts of historical comparisons just to begin to grasp the enormity of what's going on right in front of us, while the political class continues to pretend that the money being spent isn't really real, unlike, say, money to pay for health care or education.
Not only is it a astronomical amount of money, its' a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what's called the financial crisis, but it arguably related to it.
Here's CNBC's breakdown of how the money has been spent:
Financial Crisis Balance Sheet
Government Entity
Sum in Billions of Dollars
Federal Reserve
(TAF) Term Auction Facility
900
Discount Window Lending
Commercial Banks
99.2
Investment Banks
56.7
Loans to buy ABCP
76.5
AIG
112.5
Bear Stearns
29.5
(TSLF) Term Securities Lending Facility
225
Swap Lines
613
(MMIFF) Money Market Investor Funding Facility
540
Commercial Paper Funding Facility
257
(TARP) Treasury Asset Relief Program
700
Other:
Automakers
25
(FHA) Federal Housing Administration
300
Fannie Mae/Freddie Mac
350
Total
4284.5
Note: Figures as of Nov. 13, 2008
And here's the summary of items presented in their slideshow:
Big Budget Events
Project
Original Cost:
Inflation Adjusted Cost:
Hoover Dam
$49 million
$782 million
Panama Canal
$375 million
$7.9 billion
Gulf War I
$61 billion
$98 billion
Marshall Plan
$12.7 billion
$115.3 billion
Louisiana Purchase
$15 million
$217 billion
Race to the Moon
$36.4 billion
$237 billion
Savings & Loan Crisis
$153 billion
$256 billion
Korean War
$54 billion
$454 billion
The New Deal
$32 billion (Est)
$500 billion (Est)
Gulf War II / War on Terror
$551 billion
$597 billion *
Vietnam War
$111 billion
$698 billion
NASA (Cumulative)
$416.7 billion
$851.2 billion
World War II
$288 billion
$3.6 trillion
# Nuclear Weaponry
--
$7.2 trillion
# Cold War Military
--
$22.8 trillion
* Nobel Laureate Joseph Stiglitz places this figure much higher, at $3 trillion and rising, including all future incurred costs.
# Added by me. Figures reported as inflation-adjusted dollars in 1996, adjusted to 2007 dollars.
It's telling that the only spending projects that actually do compare with the bailout costs, aside from World War II, are those associated with Cold War military spending, which CNBC did not think to include. It's not just the size of such expenditures that commends them to our intention, but also the fear-based lack of rationality such spending entailed. One get a feel for that irrationality from a few excerpts from an issue brief, "The Costs of U.S. Nuclear Weapons", written by Stephen I. Schwartz and published this October, ten years after the original Brookings Institute study it was based on.
What Did the United States Spend?
From 1940-1996, the United States spent a minimum of $5.5 trillion on its nuclear weapons program.[2] The lack of data for some programs and the difficulty of segregating costs for programs that had both nuclear and conventional roles mean that in all likelihood the actual figure is higher. This figure does not include $320 billion in estimated future-year costs for storing and disposing of more than five decades' worth of accumulated toxic and radioactive wastes and $20 billion for dismantling nuclear weapons systems and disposing of surplus nuclear materials. When those amounts are factored in, the total incurred costs of the U.S. nuclear weapons program exceed $5.8 trillion.[3]
Of the $5.8 trillion, just seven percent ($409 billion) was spent on developing, testing, and building the actual bombs and warheads. To make those weapons usable by deploying them aboard aircraft, missiles, submarines, and a variety of other delivery systems consumed 56 percent of the total ($3.2 trillion). Another $831 billion (14 percent) was spent on command, control, communications, and intelligence systems dedicated to nuclear weapons. The United States also spent $937 billion (16 percent) on various means of defending against nuclear attack, principally air defense, missile defense, antisubmarine warfare, and civil defense....
Note how relatively little was spent directly on the weapons themselves, yet how spending ballooned based on that core commitment. The excess spending here was far, far beyond the already exorbitant phenomena of "cost over-runs," and was quite typical of the failure to engage in systematic thinking.
More from the issue brief:
What Was Necessary?
Contrary to official pronouncements by military and political leaders over the years, the requirements for nuclear deterrence and warfighting strategies were largely subjective and inherently undefinable. When such requirements were combined with a lack of knowledge about the current or cumulative cost of the nuclear weapons program, inadequate intelligence about and fear of the capabilities and intentions of U.S. adversaries (principally the Soviet Union), and a blanket of secrecy that kept the public, the news media, and even some policymakers in the dark, all the ingredients for a largely unconstrained competition were present.
At one end of the deterrence spectrum, one can make an argument for achieving deterrence with just a few warheads or even with the potential to construct and deploy them (e.g., North Korea). At the other are the statements by General James Gavin, head of Army research and development, who testified before Congress in 1956 and 1957 and requested 151,000 nuclear warheads just for the Army (a figure justified by plans envisioning the use of as many as 423 warheads in a single day of "intense combat")...
What was the "right" number? Given the subjective nature of the process, there can be no single figure. However, over the years, a number of knowledgeable individuals have tried to quantify a minimum nuclear requirement and it is worth considering the results of some of their efforts.
In 1957, Admiral Arleigh Burke, then the chief of naval operations, estimated that 720 warheads aboard 45 Polaris submarines were sufficient to achieve deterrence. This figure took into account the fact that some weapons would not work and that some would be destroyed in a Soviet attack (Burke believed that just 232 warheads were required to destroy the Soviet Union).[7] At the time Burke made this estimate, the U.S. arsenal already held six times as many warheads.
Several years later, in 1960, General Maxwell Taylor, former Army chief of staff and future chairman of the Joint Chiefs of Staff, wrote that "a few hundred reliable and accurate missiles" (armed with a few hundred warheads) and supplemented by a small number of bombers was adequate to deter the Soviet Union.[8] Yet by this time the United States had some 7,000 strategic nuclear warheads.
In short, free from political pressures, experts already concluded we had far more nuclear weapons than we needed as far back as the 1950s. Decades of astronomical, but utterly useless spending was to follow, along with all sorts of nonsense about traitorous liberal Democrats being "soft" on defense.
And we're still at it. Heaven forbid we should stop. That would not be bipartisan of us. It would be "polarizing", not to say, "extremist."
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