By Taylor Myers
What does 19.2 trillion mean to you? For most people, that number can be pretty hard to conceptualize. It looks like this: 19,200,000,000,000. According to the U.S. Treasury, that was the total estimated amount lost in U.S. household wealth (2011 dollars) after the financial collapse of 2008.[i]
I know, it feels like the financial crisis was ages ago, and the economy is on the mend—so what’s the big deal? The flawed logic here is that humans are really bad at internalizing a number as large as 19.2 trillion. This is a problem because despite the fact that American taxpayers were a main source of recovery funding that bailed out the US economy[ii], little effort has been made to educate people about how Wall Street’s actions lead to the worst economic downturn since the Great Depression.[iii]
Without context, it can be difficult to understand just how hard what has come to be known as the “Great Recession” hit. Terms like “bailout,” “too big to fail,” and “subprime mortgages” pepper news headlines, but nine years later, finding widely available sources that succinctly break down the problem for casual readers is surprisingly difficult.
So, what does it mean for a country to lose 19.2* trillion dollars of wealth? With that sum…
- The government could pay for about 401,413,309 people to attend a private college for four years. That’s more people than currently live in the U.S.[iv]
- Every person in the United States could receive $59461.13 in cash.[v]
- The government could pay for the entire annual budget of Medicaid in 2015—40 times. [vi]
- 960,000,000 single-family homes could be converted to solar power. That is 7 times more than the number of housing units in the U.S. [vii]
Given the magnitude of such a loss, one has to wonder why U.S. economic solvency is not a more common dinner table conversation. Is it because taxpayers are genuinely not interested in the topic, or is it because the information has never been laid out in a way that means something for most people’s lives?
Here’s another number to conceptualize: $465 billion. This was the amount paid by taxpayers for the Troubled Asset Relief Program (TARP), a bill passed in 2010 to save the economy after the 2008 collapse and commonly referred to as “the bailout.”[viii] Where would the average person go to find information presented in contextualized ways that would explain the details of TARP? What resources exist to help them determine where their share of the financial recovery funds went?
For example, when someone makes a private financial investment, they are usually able to request information directly from a broker or firm about the nature and value of their investments. Ideally, brokers or firms provide investors with all the necessary information they need to make good investing decisions. This is a concept know as “perfect information” and it is a really important part of successful economies.[ix] The system starts to break down when firm managers withhold or muddle key investment information because stakeholders are barred from making informed decisions about their money.
Not only should taxpayers be able to request an easily digestible report from the federal government about where their money went, but there is also an argument to be made that the federal government owes it to taxpayers to disseminate this information in a form that is as easy as picking up the mail or opening an email. Arguably, a few organizations are trying to do this in a user-friendly way [viii], but the onus shouldn’t lie only with them. And while the Treasury department publishes reports about the management of recovery programs, they can be difficult to find without a deep understanding of what to look for.
Beneficiaries or at least the managers of these funds (i.e. the federal government) need to make more of an effort to expose the details of these programs for the people who made them possible. That group extends far beyond economists and policy wonks; it includes retired seniors, students with after-school jobs, factory workers and new homeowners, to name just a few. The people paid for this bailout, so the people should know what they paid for.
* The 19.2 figure does not equate to cash on hand. Better Markets, a non-partisan non-profit organization that promotes public interest in financial markets, estimates the cost is actually closer to $20 trillion broken down in the following way[x]:
- $7.9 trillion in actual losses of GDP relative to potential GDP as currently estimated;
- $3.6 trillion in reduced GDP potential, primarily as a function of reduced capital stock and labor hours resulting from effects of the Great Recession;
- $9.1 trillion in losses which would have occurred, if not for the extraordinary fiscal, financial market and monetary interventions undertaken by the government early in the crisis.
Taylor Myers is an MPP candidate at the Goldman School of Public Policy and is an Editor-in-Chief of PolicyMatters Journal.
[i] U.S. Department of the Treasury. (2012). The Financial Crisis Response In Charts. Federal Report. https://www.treasury.gov/resource-center/data-chart-center/Documents/20120413_FinancialCrisisResponse.pdf
[ii] Economist, T. (2013). The origins of the financial crisis: Crash course. http://poli487.mathewson-phd.com/wp-content/uploads/2013/08/Economist-Schools-Brief.pdf
[iii] Taibbi, M. (2011). Why Isn’t Wall Street in Jail? Rolling Stone . http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216