The $700 billion financial system bailout has so far stabilized the financial markets. That part is hard to debate. The long term effects, the path, and the implications are, of course, up for debate. The questions in many discussions this weekend were what the real costs would be and whether or not these institutions should be allowed to fail.
So, one issue we wanted to consider, was what exactly does this translate to on a per individual in the U.S. In 2006, there were more than 133.9 million individual tax returns and the total number of tax returns including corporations, employment taxes, and more came to more than 168.8 million. We decided to use the larger number of 168.8 million as a representation for the entire tax system rather than just individuals, since the larger number of roughly $2.5 trillion collected was only about half of the total collections from individuals. After all, we are all in the same soup on bailouts here.
The $700 billion bailout translates to roughly $4,147.00 per filer. If you wanted to use just the individual tax filings, you would come up with more than $5,200.00. That is the price of saving Fannie Mae, Freddie Mac, AIG, Bear Stearns, Lehman, Countrywide, and other failed financial institutions via assisted mergers and other bailouts. We haven’t even gotten to the other failures which are waiting in the wings.
Dare we add in the $600 per individual or $1,200.00 per couple tax rebate stimulus checks that went out this year? We have also discussed that the entire package could even reach $1 trillion and even the notion of $2 trillion. These numbers are starting to look astronomical on a per capita basis. Before long, it might even add up to real money.
Jon C. Ogg
September 22, 2008