To justify the exorbitant cost of the bailout for the financial industry, Bush administration officials have been repeating the dubious claim that American taxpayers should expect to recover much, if not all, of the proposed $700 billion:
PAULSON: This is not an expenditure. … Money will come back in.
BERNANKE: What’s clear is that the $700 billion is not an expenditure. There’s going to be a substantial amount of recovery.
BUSH: Money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.
White House spokesmen Ed Gillespie and Tony Fratto appeared on Fox News, repeating that “a lot of that money, and maybe all of it, will come back.” Watch a compilation:
As Paul Krugman writes, “The premise of the Paulson plan — though never stated bluntly — is that these assets are hugely underpriced, so that Uncle Sam can buy them at prices that help the financial industry a lot, without big losses for taxpayers. Are you prepared to bet $700 billion on that premise?”
The White House’s assurances that the bailout will pay for itself is eerily reminiscent of the assurances the Bush team made that the Iraq war would be similarly inexpensive — if not profitable — for America. Take a look at some of those promises:
RICHARD PERLE, Chair of Pentagon’s Defense Policy Board: “Iraq is a very wealthy country. Enormous oil reserves. They can finance, largely finance the reconstruction of their own country. And I have no doubt that they will.” [7/11/02]
PAUL WOLFOWITZ, Deputy Defense Secretary: “There is a lot of money to pay for this that doesn’t have to be US taxpayer money, and it starts with the assets of the Iraqi people. We are talking about a country that can really finance its own reconstruction and relatively soon.” [3/27/03]
ARI FLEISCHER, White House press secretary: “Iraq has tremendous resources that belong to the Iraqi people. And so there are a variety of means that Iraq has to be able to shoulder much of the burden for their own reconstruction.” [2/18/03]
LAWRENCE LINDSEY, White House economic adviser: “The likely economic effects [of a war in Iraq] would be relatively small…. Under every plausible scenario, the negative effect will be quite small relative to the economic benefits.” [9/16/02]
Krugman concludes, “The whole premise of the bailout push has been ‘We’re the grownups, we know what we’re doing, just trust us.’ Sorry, but that’s how Colin Powell sold the Iraq war. Fool me once, shame on you, fool me twice … you shouldn’t get fooled.”