Back in 1965, when the national debt amounted to only $328 billion, Sen. Everett Dirksen of Illinois is said to have joked, “A billion here, a billion there, and pretty soon you’re talking real money.”
Today, with the national debt well over $10 trillion and the nation’s economy has collapsed, the government is spending hundreds of billions in a mammoth recovery effort. And that’s no joke.
How much it will all cost is hard to figure. The $700 billion Troubled Assets Relief Program, or TARP, is only a start. The federal government also has pledged to bail out Fannie Mae and Freddie Mac at probably $500 billion to $l trillion and $400 billion to protect investors in money market funds. Bloomberg.com in November put the total at $7.76 trillion. A conservative blogging lawyer, Julian Dunraven, has compiled a list that totals $8.5 trillion. That amount, unless reduced by hoped-for earnings, would be close to the current gross domestic product and would nearly double the na-tional debt.
An immediate question is how to make the cash injections work and how to keep them from being wasted or stolen or simply making the rich richer. So far, the TARP program has neither bought and refinanced home mortgages nor bought “troubled assets,” the two main purposes voted by Con-gress. Instead, it is spending the taxpayer money to recapitalize banks, whether they need it or not. Alan S. Blinder, former vice chairman of the Federal Reserve now a professor at Princeton said in a New York Times article that one of his students asked whether they shouldn’t at least change the name.
Mr. Blinder noted that putting cash into the banks is perfectly legal, since the legislation also allowed Treasury Secretary Henry M. Paulson to buy “any other financial instrument” that he deems “necessary to promote financial market stability.” But Mr. Blinder rightly objects that the government is buying preferred stock “with no control rights, at above-market prices and with no public-purpose strings attached.”
Huge government spending is essential. Worrying about the growth of the national debt and its burden on future generations is also fully justified. But conservatives make a mistake when they link the discussion to their long-term effort to privatize Social Security and Medicare. Where would working-class Americans be today if they had put their retirement and health benefits into the stock market?
An 18th century lawyer named Alexander Fraser Tytler said, “A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.” A wise and scary forecast, but this is no time to think of removing the safety net that still of-fers some protection against unemployment, accident and illness and retirement poverty.