It's a staggering amount of money but, according to Bloomberg analysts, it could cost the United States as much as $8.5-trillion to bail itself out of the current economic meltdown. Depending on how quickly the US economy turns around it could be less, maybe just half that, but no one is sure what lies in store.
Consider it the equivalent of a latter-day, in-house Marshall Plan without the communists. Or a Marshall Plan on steroids. The actual programme to rebuild Europe as a bulwark against the Soviets came in at just 17-billion in 1947 dollars. Somehow that amount of money turned into chump change today.
The LA Times is warning not to expect too much from the bailout. The paper claims this won't be a New Deal style bailout:
Much of the Depression-World War II spending was on industrial production -- building new factories and converting existing plants to produce tanks, planes and ships. Huge sums also went into developing new technologies.
Those investments, combined with pent-up consumer demand and savings from the lean war years, quickly led to budget surpluses and sharp economic growth in the late 1940s as the baby boom began.
Analysts warn not to expect that to happen again. This time the government spending is largely ethereal, with the Federal Reserve printing more money to inject liquidity into the financial system and keep banks and other institutions afloat. And savings rates are low.
"Too many Americans have overextended themselves with regard to credit and debt, and too many have been following the bad example of the government," David Walker [president of the Peter G. Peterson Foundation and former head of the Government Accountability Office] said. "It is imperative that we recognize that this country has been living beyond its means and that we face large and growing structural deficits even after we turn the economy around."
Walker, the former US Comptroller General, has played the role of Cassandra in recent years warning everyone from graduating cadets at Annapolis to Daily Show audiences of their nation's and their people's debt affliction. Including unfunded liabilities, such as Social Security and Medicare, he estimates the average liability, per household, comes in at $480,000 against an average annual household income of just $50,000. He's compared it to carrying a really big mortgage on a really luxurious house except minus the house.
Much as some analysts don't expect a New New Deal, an American recovery might not be possible without it. It has been America's shift from manufacturing to a FIRE (financial services, insurance, real estate) that has underpinned this crisis.
The greatest wealth transfer in American history has been the result - not the product of the "socialist plot" scenario the Repugs use to scare blue collar America with, but the direct consequence of open markets and outsourced jobs. That has caused America's wealth to be invested in growing the economies of its rivals, notably China. It's a short-term policy that reaps huge rewards for the rentier class who see their investment incomes blossom but at the direct cost of the wage-earning public and the nation at large.
America cannot and will not recover until it rebuilds its middle class. They are the key to that nation's economic engine and, without them, it's a nation reduced to a gaggle of wealthy who generate their bounty from investments abroad. Good luck with that.
What is often overlooked is that the rapidly expanding gap between rich and poor is a warning sign of problems to come. It's a lesson we in Canada also need to relearn.
America is in dire need of a redistribution of wealth to make good all the wealth that's been transferred from the working and middle-classes to the wealthiest few, especially during the Bush regime. All that madness must be undone if the United States is to pull out in time. The alternative is a society riven with bitterness, recrimination and disunity.