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:
• $12.7 billion, $115.3 billion* - Marshall Plan
• $15 million, $217 billion* - Louisiana Purchase
• $36.4 billion, $237 billion* - Race to the Moon
• $153 billion, $256 billion* - S&L Crisis
• $54 billion, $454 billion* - Korean War
• $551b, $597 billion* - Invasion of Iraq
• $111 billion, $698 billion* - Vietnam War
• $416.7 billion, $851.2 billion* - NASA
• $32 billion (Est), $500 billion (Est)* - The New Deal
$3.92 trillion* - TOTAL
* Inflation adjusted cost
Yes, it's certainly a lot of money. Getting out of this mess is likely going to cost more than that, partly because the people now charged with spending it seem clueless.*
However, those who are questioning the need for deficit spending at a time like this are standing on shaky (macroeconomic) ground.** We don't want another Great Depression. And it wasn't until the governments funded World War II that the world finally dug its way out of that one.
This time, the idea is to spend as if we are in a war now -- lifting the global economy -- so we avoid going through another depression. A depression would likely create all the conditions for real wars to happen. Either we "spend smart" now on something worthwhile, or "spend stupid" later on wars.
The money has got to be spent wisely. Governments should help citizens to invest in productive activities that will create new assets, rather than just prompting consumer spending on wasteful throw-away goods. Now is the time to build the infrastructure necessary for the energy-efficient global society of the future. That's surely what it means to spend smart.
* UPDATE: It seems the he lame-duck president even managed to screw up the City Group bailout. Krugman blogs, "A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more."
** I heard Republican Pat Buchanan say on television today that "high US government" spending created the financial mess we are in. That's rubbish. Financial deregulation, the growth and bursting of a financial bubble, and -- attendant to all this -- the creation of dodgy paper assets lies at the root of the financial mess.