How many of you have received an e-mail forward from a friend or co-worker recently telling you how much money you would have received if we just split up the bailout? Go ahead, raise your hands.
Yea, that’s what I thought. Quite a few of you.
I’ve overheard people in coffee shops, at lunch, on the elevator, and walking the dog. I’ve been sent multiple e-mails going over the numbers.
The Government Bailout E-mail Forward
The basic idea of the e-mail forwards I received was that if we took the total amount of money the government is spending on the financial crisis and divided it up by the total number of Americans, we would each get $X each.
That $X has varied from e-mail to e-mail I’ve received. I’ve seen everything from $75,000 to $300,000.
Woah, hold up now. Let’s just run the math and see where that puts us.
According to the New York Times, the government has committed $12.1 trillion to fixing the economy/overcoming the financial crisis. That’s committed, not spent. Big difference there. Remember this.
Since the government has only spent $2.5 trillion (roughly) thus far we will use that number. And I’ll go with a nice round number of 300 million for the total number of Americans (men, women, and children). This is a big calculation so you’ll need to open up Excel to run the math — a regular calculator can’t go to the trillions.
Here is 2.5 trillion with all the zeros: 2,500,000,000,000.
Here is 300 million with all the zeros: 300,000,000.
Divide 2.5 trillion by 300 million and Excel spits out this number: $8,333.33.
$8,333.33 per American Citizen Spent on Bailout
That’s what has been spent on a per person basis of the committed bailout funds. Not $75,000. Not $300,000.
That’s a lot of money, true. But at about 1/9th of $75,000 it isn’t nearly as bad as those e-mail forwards tell you it is.
But, wait a second. Not every citizen pays taxes. Surely that number is closer to $75,000, right?
Divide the Bailout by Total Taxpayers
Not every citizen pays taxes. According to Wikipedia in 2007 138 million people paid taxes. You have folks that don’t make enough income to qualify, students, stay at home parents, children, etc. Let’s round up to 140 million or 46% of the citizen base.
2.5 trillion divided by 140 million = $18,116.
That’s still a lot of money, but no where near $75,000 or $300,000.
Granted if you substitute 12.1 trillion (the total amount committed) for the 2.5 trillion (total amount spent) the numbers get very large very quickly.
12.1 trillion:
- $40,333 per citizen (men, women, children, non-tax payers)
- $87,681 per tax payer
Now that’s a ton of money. But again, this isn’t what those e-mail forwards say. They don’t clarify per taxpayer. They don’t clarify spent versus committed. It’s just all thrown together to get you outraged — so that you’ll forward on the misinformation to someone else.
Bailout: Good or Bad?
I’m not here to tell you the bailout is a good or bad thing. I’m just tired of hearing folks squawk out the same information without thinking. Running the math really isn’t that difficult. Think before you hit forward. Add dialogue to the conversation. Get your friends and family to think.
On top of all that the government isn’t just throwing this money away. At least, not entirely. (Yes, I do believe much of it is wasted.)
Some of the funds involved are buying up assets like mortgage notes, bank shares, and commercial paper. While the value of these may be significantly less than what the government is paying for them, they aren’t worthless. Even if they were 10 or 20 cents to the dollar paid that is a lot of money when you are talking trillions of dollars.
From the NY Times article I linked to above, some of the bailout is going toward shoring up money market funds — and the mutual funds have paid over $800 million in fees to the government. That takes a small piece of the sting out. (Very small, but it still counts in my book.)
I’m afraid to ask this, but what the heck. Readers, what do you think of the bailout? Had you received an e-mail forward with a miscalculation of the money spent thus far?
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