How Big Is the Bailout?
The $700 billion “Paulson plan” (or “Hanky Panky”) is big.
In fact, $700 billion is such a startlingly large number that a surprisingly large amount of commentary has gotten it completely wrong.
For instance, click here to see the results of a Google News search on “$700 million” and “bailout.” It seems that plenty of journalists got the million/billion distinction wrong. (Plenty of bloggers, too.)
Interestingly, not all of these articles are mistaken — several were noting that Treasury Secretary Paulson is “reportedly worth about $700 million.”
How big is this million versus billion mistake? As Jon Stewart reminds us, $700 billion is equal to around 2,000 McDonald’s apple pies per American, meaning that the million versus billion mistake amounts to 1,998 apple pies difference.
But there’s a deeper economic issue here. The Paulson plan does not “cost” the taxpayers $700 billion dollars. The plan is to give Paulson a $700-billion war chest to purchase securities that have some value.
Now it might be that we are buying truly valuable securities at bargain prices, in which case we all make apple pies; or it might be that we are buying junk, and the true cost will be several-hundred apple pies each.
David Leonhardt’s splendid column in today’s New York Times does a great job in outlining these issues.