Yesterday afternoon, Politico posted an article with the headline “Bailouts could cost U.S. $23 trillion.” The headline number, pulled from a report by TARP Inspector General Neil Barofsky, made it seem as if the overall cost of all the economic rescue programs will eventually total $23.7 trillion. The huge number made its way through the media like wildfire, and was cited over and over by the likes of Lou Dobbs and Sean Hannity. Watch a compilation:
However, what everyone using this number failed to mention is what it means and how it was calculated. In the report, Barofsky clearly wrote that the number was “designed to suggest the scale and scope of those efforts and not to provide a firm financial statement“:
These numbers may have some overlap, and have not been evaluated to provide an estimate of likely net costs to the taxpayer.
To arrive at $23 trillion, Barofsky simply added together every financial rescue program that has been proposed, including those that were discontinued or never even started. In the New York Times, Floyd Norris broke the number down further:
It also assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless. It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.
Norris added that “the sheer unreality of the number did not stop some members of Congress from taking the estimate seriously.” Indeed, Rep. Darrell Issa (R-CA) said that “if you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just one trillion dollars — $23.7 trillion is a staggering figure.”
It’s very unclear what Barofsky thought he would accomplish by publishing this number, since it’s indicative of basically nothing. And if the media are going to report such a worthless number, the least they can do is provide some context. Instead, they told everyone that taxpayers are on the hook for $23 trillion.