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Jun. 18 2009 - 11:41 am | 16 views | 0 recommendations | 4 comments

The Bailout In Comparison To Other Historical Events

Ritholtz's visual comparison leaves out WWI and WWII

Ritholtz's visual comparison leaves out WWI and WWII

After eight years of the Bush Adminsitration’s hell-bent-for-leather deficit spending on pointless wars and tax-breaks it is with a degree of bemusement that the left now faces a Republican party suddenly obsessed with fiscal restraint.  Indeed it seems that the American right can not mange to eek out so much a a week without waxing apocolyptic about the impending catastrophe sure to befall the United States thanks to the deficit expenditures undertaken in the last 12 months or so.

That slightly more than half of those expenditures were approved on George W. Bush’s watch is neither here nor there; sound fiscal policy is sound fiscal policy reguardless of whose name appears on the bottom of the bill.

Even so, the numbers involved in the bailout are enormous ones and critics and proponents alike have found it  difficult to convay their sheer enormity.  Many have turned to supurlative rich comparisons like that featured in Barry L. Ritholtz’s “Big Picture” blog.  Ritholtz writes, “In just about one short year (march 2008 -  March 2009), the bailouts managed to spend far in excess nearly every major one time expenditure of the USA, including WW2, the moon shot, the New Deal, Iraq, Viet Nam and Korean wars — COMBINED.”

Now, as Ritholtz’s graphic (source: Jess Bachman at Wallstats) illustrates, the bailout has been expensive but comparing it to the combined cost of WWII, the Moon Shot, the New Deal, Iraq, Vietnam, and Korea is more than a bit of a stretch.  Even ignoring the historical context of these events, the numbers simply don’t stack up.

A closer examination of Ritholtz’s Wallstats-graphic reveals the conspicuous absense of two fairly major American one time expenditures: the first and second world wars. Indeed, by Ritholtz’s own admission (in a previous blog post), WWII alone cost the United States $3.6 Trillion,  an amount Ritholtz estimated to be about $979 Billion less than the cost of the bailouts back in November.   Adding the combined cost of the New Deal and the Iraq War to the price-tag for the second world war more than makes up the difference as of November leaving the entire Cold War Era and the whole of the 19th Century besides to cover the rest.  Given that the US managed to tack on $5 Trillion in debt (to say nothing of expenditures) during the Cold War alone, Ritholtz’s comparison falls very very flat.  [Author's Note: Mr Ritholtz indicates that this is a preliminary version of the graphic in question and that WWII will be added in at a later date]

Misleading or otherwise, however, Ritholtz’s graphic is a good starting place from which to visualize the cost of the bailout and the cost of other significant outlays in American history.  Fudging the figures a touch, the Second World War may be compared to the combined cost of the Moon Shot, the S&L Crisis, the Korean War, the Marshall Plan, the Iraq War, the Lousiana Purchase, the Vietnam War, and the New Deal… combined.  In other words, adding WWII to the left side of the graphic doubles the size of “other expenditures.”  WWI is a little more difficult to assess but we can spit-ball it at about 318,000,000,000 inflation adjusted dollars – roughly analogous to another Marshall Plan and another Lousiana Purchase.

The mental image you, the reader, should have now is of two roughly equal stacks of blocks with the one on the right marginally larger that that on the left.  All of this before adding in events which are much more difficult to quantify yet obviously vast in scope and scale: the Civil War, the Cold War, the American Revolution, the War of 1812, and the long-term-consequences of the US abandonment of the gold standard in the 1970s.

This is not to say that the bailout has not been expensive nor to suggest that it does not set a concerning fiscal precedent;  it absolutely is and it absolutely does and Mr Ritholtz is quite justified in his alarm.  But if we are to address these questions and face these issues with any amount of seriousness and rigor we must start by telling the truth about our present and our past.  No matter how much we have borrowed, we can always afford to do that.


Comments

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  1. collapse expand

    Hey Chris,

    I (apparently) did not communicate my point well.

    First off, note that you omitted the 2nd paragraph, which stated “the total costs to the taxpayer of all the monies spent, lent, consumed, borrowed, printed, guaranteed, assumed or otherwise committed.” I did not mean to imply that this will cost $14 trillion. As I have stated ad nauseum elsewhere, we are likely to see 90% of these monies come back to the Treasury.

    Second, this was not my artwork — I explicitly wrote: “I once again went to Jess Bachman at Wallstats. I gave him my list of expenditures (inflation adjusted of course!) and he went to work.” Its one artist’s attempt to convey visually what I spent 322 pages explaining in the book, and I tihnk he did a fine job.

    The graphic — which is not in Bailout Nation — is supposed to be a rough visualization — It was never meant to be a precise blueprint (I will ask Jess to add WW2 into the next gen of this).

    Third, I will note the omission on the blogpost.

    Last, you obviously haven’t seen the book, because it sure as hell does not exonerate George W. Bush or the GOP !

    • collapse expand

      Mr Ritholtz,

      I made some changes to the article after receiving an email from you. I welcome your reposting it as a comment but should note that some of those changes appear to render some of your critiques superfalous. I point this out only so that readers will understand that it is I, not you, who was in error in this regard (most specifically my failure to properly source the graphic).

      I’m not sure what is meant by my omission of the blog-post; I believe that I linked to two of your blog-posts directly.

      As to the book, it is not the intention of this article to suggest that you are in any way apologizing for the actions of President Bush or the GOP. That said, Bailout Nation will certainly be in my next order from Amazon. If I end up posting a review of it I hope I can count on you to comment.

      In response to another comment. See in context »
  2. collapse expand

    I think it is an interesting graphic, but miserably fails to convey the scope of money. Those blocks are amazingly expensive. Let’s see that graph, but with amount of bread that could buy, or such similar comparison. It is so hard to wrap one’s head around this amount.

  3. collapse expand

    I’m sorry but what is the point of this? It is just apples and oranges…we survived all that spending…the problem is how to get out of this current mess. Do nothing, spend but only on your friends and lose track of the money out there like Bush. The debate is going nowhere fast with lots of smart people arguing in the real world and others about putting our kids in hock…HEY that already happened before any stimulus. Let’s talk about now please.

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    About Me

    I got started in journalism as a contributor to MSNBC.com's social news site Newsvine. While writing there I scooped the AP on the April 16 2007 shooting at Virginia Tech, covered the Democratic National Convention in 2008, and was named one of the Wall Street Journal's "Wizards of Buzz."

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