$800 Billion burning a hole in your pocket? Spending ideas


Against the better judgment of hundreds of economists as well as the vast majority of the voting public (those annoying constituents), Congress approved Henry Paulson's bailout plan. Now Paulson's appointed "bailout czar", Neel Kashkari has $800 billion tax dollars burning a hole in his pocket and he is trying to figure out how to spend it. My wife was a loan officer and defacto credit counselor way back in the late 1900s when most banks and credit unions still carefully considered credit ratings, debt/income and debt/asset ratios. She often helped people understand how to prioritize their spending. Sometimes little changes such as forgoing the daily cappuccino were enough to lift people out of debt and improve their credit rating. Our bailout czar's job is slightly different. In order to efficiently bail out failing financial institutions, he must invest taxpayer's money on assets that no one in their right mind would buy with their own hard-earned money. I personally don't think this is a good plan. At best it is a temporary patch to a deflating asset bubble. If the bailout czar really wishes to use tax money to improve long term American economic growth and competitiveness, he should consider the following options for spending 800 billion dollars:

  • Bailout Chrysler 800 times (in 1979 dollars). This cash flow diagram indicates that, not so long ago, Detroit fueled a huge portion of the U.S. economy.
  • Repeat the Apollo moon lander program (including R&D from 1961-1969) 32 times (8 times in 2008 dollars).
  • Install photovoltaic solar roofs on 32 million homes (1/5th of all homes in the U.S.)
  • Pay full (unadjusted) tuition for their first year of Yale for 70% of 18-25 year old Americans. (Quoted tuition is for Yale medical school, but Yale has other specialties which could prepare students to become business leaders, presidents, senators, economists...)
  • Fund the National Cancer Institute for 165 years.
  • Provide microcredit loans for the world's $1 billion working poor.
  • Fund UNICEF for 266 years.
  • Buy every possible ticket combination in the Florida Lotto for 57142 weeks, which means Paulson could hold a winning Florida lottery ticket every week for 1098 years.
  • SETI. Wisconsin's former Senator and spendthrift William Proxmire once awarded his famous "Golden Fleece Award" to project SETI. Paulson's bailout money could fund project SETI for 160,000 years.

I'm confident that any of the items on my shopping list would give U.S. taxpayers more bang for their buck than the current plan to reinflate the property bubble, an asset bubble which caused a massive misallocation of financial and intellectual resources and actually works against U.S. global competitiveness.

Incidentally, $800 billion is a lot of money, but it isn't an infinite amount. Unfortunately it isn't enough for the following:

  • $800 billion won't buy enough Starbucks cappuccino to fill Lake Erie, the smallest great lake. However, if you combine all of the recent Fed and treasury bailouts, you could buy enough instant coffee to flavor the Great Salt Lake. You could also buy enough cheap off-brand root beer or Kool-Aid to fill Lake Okeechobee. Wouldn't this be a nice modern variation on the Boston tea party?
  • $800 billion could easily fulfill Herbert Hoover's promise of "a chicken in every pot" (in fact everyone's pot could contain 666 $4 chickens), but to put "a car in every garage" as he also promised, you'd want slightly more money unless we're willing to settle for a used or economy car in every garage.
  • $800 billion would fill a bag with about 80 billion decent ACE hardware hammers but apparently only 1.3 Billion military grade hammers.
  • If you sent $800 billion to the International Star Registry, they would only name 22 Billion stars after a loved one in their "official" book. But the Milky Way galaxy contains at least 200 billion stars and there are billions of other galaxies, each containing hundreds of billions of nameless stars. So at best, only about one in every 10 stars in our galaxy could be named "Henry Paulson".

    Billions and Billions of stars


"Believe this is bad?"
The latest folly (can't make up this stuff), CERBERUS (Chrysler's current owner) now wishes to become a public BANK so their GMAC division can qualify for Government (taxpayer) bailout monies!
My question is this,
"How does a PRIVATE business entity rightfully qualify for PUBLIC financial assistance?"
Recalls, boxer 'Smokin' Joe Frazier recanting a word sure to be remembered - "Scambuggery'.
Alive and Well in one C-R-A-Z-Y America!

Posted by William R. Walling on October 29, 2008 at 07:04 PM GMT+00:00 #

I like the idea of 32 million homes being fitted out with photovoltaic roofs and it doesn't take a genius to work out why...

For the 'bail-out' funds to be used on something like that would take a sudden outbreak of common sense unlike any we've seen before.

Posted by Che Kristo on October 29, 2008 at 09:11 PM GMT+00:00 #

"Pay full (unadjusted) tuition for 1 year of Yale for 70% of the Americans in the 18-25 age range. "

My reflex was to go for photovoltaic solar roofs, however, educating the nation would help far more, because it would bring scientific diversity.

An educated nation wouldn't stand for the socio-political-economic mess that we have today, they would go out on the streets in mass protest, they would initiate political action to refactor the system into a direct democracy, no more corrupted, uneducated senators and congressmen, people vote on every major issue DIRECTLY, no "college electorals", no Obamas, and no McCains or any other such schemes!

Posted by UX-admin on October 30, 2008 at 01:02 AM GMT+00:00 #

Thanks for all of the comments. I didn't know about Cerberus's plan. I guess there are still clever business leaders out there. If only there were clever governments.

Although I also can see enormous value in solarizing America, I agree with UX-admin. Somewhere we've lost the plot with respect to education and focused only on the fiscal value of education while ignoring the societal and personal growth values.

Universities are turning themselves into expensive trade schools or country clubs in order to attract students who will bring the most wealth into their coffers. Students abandon the sciences and arts where their talents could produce something for the betterment of society because these rarely pay off in the short term. Even basic research has slanted towards areas with the quickest fiscal gain.

The focus on short term quick money degrees has become necessary in order to allow students get out from the debt of enormous student loans. The price of a U.S. university degree has risen at several times the rate of inflation over the past 20 years and the value of this degree has fallen. Like the housing bubble, this is unsustainable and only hurts our national competitiveness.

Posted by bnitz on October 30, 2008 at 05:23 AM GMT+00:00 #

Just great ;-)

Posted by Sebastian on October 30, 2008 at 09:20 AM GMT+00:00 #

Thanks, it was fun to imagine shopping with the bailout czar. I'm not sure if it's funny yet, it's a bit too close to the truth. As Lily Tomlin said,

"I try to be cynical... but I can't keep up."

Posted by bnitz on October 30, 2008 at 09:30 AM GMT+00:00 #

I don't know when I made the mistake, but it looks like the projected cost of the recently passed Paulson bailout is _only_ $700 Billion, not $800 billion. So either multiply my estimates by 7/8ths, or just take advantage of the 12.5% discount and assume that the plan must be a bargain, even though the public part of the plan doesn't seem to forbid siphoning some of this money directly from the treasury into dividends and bonuses for managers of the bailed out entities.

Posted by bnitz on November 18, 2008 at 05:59 AM GMT+00:00 #

Fed Commits $800 Billion More to Unfreeze Lending
By Scott Lanman and Dawn Kopecki Nov. 25 (Bloomberg) -- The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion. If you're keeping score, the total is now over $8 trillion:


This means my initial shopping list should be scaled up by a factor of 10!

A trillion here, a trillion there, and pretty soon you're talking real money.

Posted by Brian Nitz on November 25, 2008 at 07:26 AM GMT+00:00 #

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