Laura Conaway at Planet Money asks, “So how big is $700 billion, anyway?” And Brad Setser tells her, it’s five percent of GDP; it’s “real money.”
Good, but maybe we can do better: remember the terrible horrible no-good very bad New Deal, which was, like, socialist and all that? All federal non-defense spending during the New Deal was only a few percentage points of GDP bigger than just the bailout.
And remember—that $700 billion isn’t total payout, it’s how big the balance can be at any time. Theoretically, the total bailout could be even bigger.
UPDATED to add, the Reconstruction Finance Corporation, which was the Bank Bailer-Outer of the New Deal, had something like $2 billion to work with; $500 million appropriated and license to borrow $1.5 billion. $2 billion was about 3.5% of GDP in 1932.
UPDATED AGAIN to add, per Jonathan’s question, that federal nondefense spending has for the past four years or so been around 16% of GDP.
10 comments
September 23, 2008 at 10:41 am
ari
So, big then, right?
September 23, 2008 at 10:44 am
SomeCallMeTim
I think your post might be clearer if you measured both the New Deal and the bailout using the standard breadbox unit. Even after having read the post twice, I can’t quite make out whether the bailout will be bigger than a breadbox, bigger than two breadboxes, etc.
September 23, 2008 at 11:53 am
Jonathan Dresner
It would also be interesting to see recent federal non-defense spending as percent of GNP, to give a sense of scale related to our current budget.
September 23, 2008 at 12:44 pm
Megan
Hm. So the bailout costs about as much as the high estimate forecasts for mitigating and adapting to climate change. Sure wish we didn’t have to pay for both at the same time.
September 23, 2008 at 12:59 pm
politicalfootball
Well, then there’s the war, too. But hey, bailouts and war are necessary. I hear that climate change isn’t real, or if it is, it will work out for the best in the end.
September 23, 2008 at 2:52 pm
dana
SCMTim, part of the problem is that I don’t think we get a breadbox out of this.
September 23, 2008 at 3:43 pm
eric
Jonathan, see the second update….
September 23, 2008 at 10:30 pm
Jonathan Dresner
Thanks!
In one fell swoop, they are proposing effectively doubling the deficit for the next 2-4 years, assuming war costs don’t spike (or drop precipitously), raising non-defense spending by a third (unless they slash benefits and discretionary spending).
I don’t see how this turns out well, do you?
September 23, 2008 at 10:41 pm
Vance
Well for whom?
September 24, 2008 at 4:24 am
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