September 25th 2008
UNITED STATES - Treasury officials and congressmen are scrambling to find a viable solution to what been dubbed the worst financial meltdown since the Great Depression, and are tossing around figures unimaginable to most “regular folks.”
The latest amount being discussed in Washington is $700 billion, which would come at the taxpayers’ expense.
If the three-page act is passed as is, what would this mean to the taxpayer? Dr. John Yeutter, associate professor of accounting and Certified Financial Planner, explained the situation in layman’s terms.
“Let’s put this in perspective,” said Yeutter. “The U.S. Federal Government collected $2,568 billion in fiscal year 2007, while spending $2,730 billion, generating a total budget deficit of $162 billion. This proposal asks for more than 25 percent of last year’s collections. This is more than the government spent on defense ($549 billion), Social Security ($581 billion), or Medicare and Medicaid ($561 billion) last year. So we’re talking about ‘real money’ here.”
Yeutter indicated this money will come by increasing the federal debt, and will have to be paid back somehow.
“So our children and our grandchildren will have to pay for the mistakes of a few executives on Wall Street, through future taxes,” he said. “So we shouldn’t expect anything but tax increases until this debt is paid.”
Indeed, a review of the text of the bill, available at the New York Times Web site, provides a stark – some might say frightening – plan that would leave U.S. Treasury Secretary Henry Paulson in charge of running the whole show.
Particularly sobering is Section 8 of the three-page document, which states: “Decisions by the Secretary [of the Treasury] pursuant to the authority of this act are non-reviewable and committed to agency discretion, and may not be reviewed in any court of law or any administrative agency.”
If passed, not only would the legislation increase the national debt to $11.3 trillion, it would leave one man in charge with absolutely no oversight.
According to a report by the Associated Press, Federal Reserve Chairman Ben Bernanke warned Congress Wednesday they risk a recession if the plan is not approved immediately, as is.
Yeutter is concerned about the act and its potential long-term effects on other programs.
“We all hope that the government has the ability to stop what might be a crisis of similar proportions to that which brought on the 1929 depression,” he said. “The difficulty that exists here is that our lawmakers are being told, ‘Give us this blank check, or the economy will collapse,’ and the current proposal has little in it to provide protection for the citizen taxpayers who are funding it, or accountability from the secretary of the Treasury who will administer it. This also means the next administration, whoever that may be, will be left with less available funds to spend solving other economic or social problems, like health-care costs, health-insurance costs or education.”
The latest U.S. Census information indicates there are 116 million households in the U.S. – given that information, the cost per household for this proposal equals approximately $6,000.
What some may find even more disconcerting is there is no “Plan B,” should this plan fail.
According to Eamon Javers, writer for Politico magazine, if this week’s bailout plan fails, the government will probably have no choice but to continue to buy up assets, which could include credit-card debt, car-loan debt, as well as commercial real-estate debt, until the problem abates or taxpayers gain control over the banking system.