Red Ink Read Free

rapidly than almost anything else and the number of people relianton the government programs has grown. In 2021, if current policies remain in place, government spending on health care will consume 33 percent of federal spending, according to the Congressional Budget Office (CBO), the nonpartisan arm of Congress that tracks such things.The Medicare prescription drug benefit alone will cost the government more over time than the wars in Afghanistan and Iraq. The spending on the wars will end someday; the drug benefit is permanent.
    Nearly all the growth in the federal budget over the next ten years is going to come from spending on health care and interest payments unless something changes. “You can’t fix this without doing health care,” says Paul Ryan. “I mean, health care is the driver of our debt.” And, as he and others routinely observe, even though the United States spends far more per person on health care than any other country, it isn’t close to having the world’s healthiest population.
    The $700 billion bank bailout didn’t cost taxpayers nearly as much as initially feared.
    The financial crisis was an economic calamity. It provoked the worst recession since the Great Depression, the cost of which went far beyond the boundaries of the federal budget. The Great Recession, as it became known,wiped out $7 trillion in home equity. Two and a half years after the economy had resumed growing, nearly 13 million Americans were still outof work. The United States faced significant deficits even before the recession, but the size of today’s record-busting budget deficits are, in large measure, the consequence of revenues lost, taxes cut, and spending increased because of the recession.
    In rescuing the banks, the big insurance company American International Group (AIG), money market mutual funds, and automakers General Motors and Chrysler, the government—that is, the taxpayers—took enormous risks. “At one point, the federal government guaranteed or insured $4.4 trillion in face value of financial assets. If the financial system had suffered another shock on the road to recovery, taxpayers would have faced staggering losses,” the bailout’s Congressional Oversight Panel concluded in its final report. Indeed, private investors who risked their money to shore up big financial institutions—Warren Buffett, for one—demanded much better returns than the government did.
    But actual direct cost to taxpayers for the much-maligned bailout of the banks proved to be a lot lower than expected. The sticker price on the Troubled Asset Relief Program (TARP) was $700 billion, the mind-blowing sum that George W. Bush and his Treasury secretary, Hank Paulson, got from Congress in October 2008. As of the end of March 2012, the Treasury said it had disbursed or promisedonly $470 billion of the $700 billion. In the end, it turned out, the banks didn’t need all the money that Congress authorized, and the government didn’t spend all $50 billion Congress originally earmarked for beleaguered homeowners.
    By early 2012, about 67 percent of the money that went out had been paid back with interest, another $12 billion had been written off, and much of the remainder looked likely to be recouped. The biggest losses to taxpayers are expected to come not from the banks but from AIG and GM; the ultimate cost depends on the price of the AIG and GM shares the government holds. At last tally, the CBO and the White House Office of Management and Budget projected the ultimate cost of the program will be between $32 billion (CBO) and $60 billion (OMB). But the headline is the same: the cost is significantly less than the hundreds of billions the agencies—and the media—anticipated in the darkest days of the financial crisis.
    The biggest direct hit to taxpayers from the financial crisis, so far, isn’t from TARP, but from the bailouts of Fannie Mae and Freddie Mac, the mortgage giants that were created by the government, later