The Real Cost Of The Bailout

Morris Segall      bailout, banking system, obama

I’ve said publicly in the past that that I thought the cost of rescuing the banking system and the economy would easily be $2 trillion. It now looks like the Obama administration has a $700 billion stimulus package in the works on top of the current bailout package and the cost of bailing out banks and Wall St. so far.

If the $700 billion price tag of the Obama program is true, we are there.

This will likely not be the end and we could be looking at more than $2 trillion before this is all over. The impact on the Federal budget deficits and national debt will be enormous.

It also appears a major public works/infrastructure program will be part of the stimulus program. I have also been quoted by the Philadelphia Inquirer that I did not believe such a program will have the desired effect the government assumes. In an economy where more unemployed are white collar workers and state and local governments are slashing transportation and infrastructure programs, it is dubious the federal public works spending will have the multiplier stimulus impact.

We really need to have a whole new approach to this economy that is nothing like the historic post-war economy we have grown up with. Look what is happening to auto dealerships as a result of the demise of the big 3 auto makers. Historic solutions to recessions have already not worked, i.e. lowering interest rates alone. Bailing out sick companies is not the answer. Uncapped public spending to bail out companies will cost us dearly down the road.

The government’s strategy must be to put consumers back on their feet.  If the government wants to help consumers get back on their feet, they need to find jobs publicly or in the private sector for all of the white collar workers from finance, trade, business services, etc. that are chronically unemployed and are not finding ready re-employment.