Bailouts Revisited

It's finals week here in Pittsburgh, which can only mean one thing: procrastinate instead of doing important things by doing less important things that I used to be...putting off doing.

Which means it's time for a blog post.

The initial damage reports are in from the bailouts: Taxpayers lost $61B on AIG, auto bailouts but gain on bank bailouts

Breaking it down,

• the government lost over $30B on AIG,
• lost over $30B on Chrystler and GM,
• and is projected (by the Treasury) to end up gaining $19.5B on the bank bailouts.

But don't worry, the $700B program has been extended through October, so there's still time for things to get worse.

Speaking of worse, the bailouts were a bigger blow to American taxpayers than the numbers imply. For one thing, insolvent banks weren't the only one's receiving TARP money. Healthy banks were forced to take it as well (the Fed didn't want TARP funds being more of a scarlet letter than they already were), and pay it back with interest. One wonders how much of that $19.5B was extorted from healthy banks.

And let's not forget the Cash-for-Clunkers program, which amounts to Auto Bailouts II: the Revenge.

But the real cost can't be encapsulated in a simple number. What the government has done is to give us a zombie economy. And if there's anything we Pittsburghers understand, it's zombies. I'm not usually a bit National Review fan, but let me point you for further reading to this article from February 2009: Caution: Zombie Economy Ahead. Imagine a horde of undead congresspersons shambling down Wall St. groaning "caaaaaaaaaaars," and you'll have a pretty good picture of what the country is going go look like for the next decade or so.

The more pessimistic picture is a Misesian crack-up boom, which would be the result of the Chinese and holders of petrodollars trying to cash in for assets, a process which would soon spiral out of control until people started burning Federal Reserve Notes to keep warm.