What is Your Debt Share of $700B Bailout?

As the U.S. government debates a $700 Billion bailout for the financial industry, what does that mean for you and me, and our kids? One summary I saw broke it down like this:

About $2,300 per American
About $6,000 per U.S. household

The tally for all the various rescue measures launched by U.S. authorities this year runs to about $1.8 trillion. The $1.8 trillion is equal to:

About $6,000 per American
About $15,500 per U.S. household

Who will pay that back? Tax payers. But wait! We don’t all pay taxes.

As the chart above illustrates, in 2006, the percentage of U.S. tax payers who had a zero tax liability was 32%. That leaves 68% of us to pay back the 1.8 Trillion in debt, which changes the numbers.

But wait!

BOTH the McCain and Obama tax plans would increase the number of non-payers to 43% or 44%. Heck, lets just round it up to 50%, since we’re talking about government give-aways here.

So the real question is, or ought to be, what is the cost of the bailout per tax paying household?

I’m not a math or accounting guru, but I think, to find the real per household number, we’d take the afformentioned “cost per household” number of $15,500 and simply double it to account for the new tax policies about to come online next year, meaning, if you’re a tax payer, the government just put you and your kids on the hook (or is about to) for $31K in debt.
More on McAin and Obama tax plans.

Posted by Steve
8 years ago

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Tim - 8 years ago

Yeah, I don’t know if I really make money off the stock market or if the stock market just makes money off of me.
Completely ridiculous. And the best part is that if we don’t get a politician that’s willing to raise taxes, we’re going to be on the hook for a whole lot more once you factor in interest. I’m not a big fan of taxes, but when you consider that paying off our debts would be the equivilant to removing Social Security or the military from our budget, it seems a little responsibility would be nice. We seem to get something back from the military and social security. We get nothing back from paying interest on our debt.

Michael @ The Stage Coach - 8 years ago

Depressing – Tim’s got a great point: we’ll pay the interest and pass the original debt on to our kids.
I was not for any bailout – but when this one hit the news I was flabbergasted. While my normal leanings are conservative (in the true sense, not Republican), the proposed bailout was insane. Here’s a thought, and it’s a win-win: Why not take $700 trillion dollars and pass it out to those who bought the lousy mortgages, allowing them to borrow back on a mortgage they can afford? Saves their homes, saves the defaulted mortgage companies. What’s not to like?
The worst part: we will not know how poorly the $700 billion is spent until after it is all gone. And it will be too late.

Peter - 8 years ago

I’m a pretty strong libertarian, but calling this a simple bailout seems like an overstatement. If I’ve understood what I’ve read, the government is basically repossessing these companies’ assets so they can slowly and non-disruptively sell them off. The assets are overvalued by the housing bubble of course, but the real “bailout” amount is the loss the government takes on the pawn job, not the $700B initial purchase of the assets.

Barry - 8 years ago

How about taking that 700 Billion and starting some new banks that don’t have toxic debt. They could have tight underwriting standards from the beginning and never get in this mess.

ARZ - 8 years ago

Yeah, theoretically the tax payer do fund the US government and in turn are responsible for the national debt the US government raised. However, in actuality, you don’t feel a thing. You continue to pay the same amount no matter what happens. This is because the $700 Billion or 1.8 trillion raised are through bond and other forms of debta, which are basically borrowed from whoever want to invest (Americans and foreigners alike). Even though you think that foreign governments own a large share of this debt (China, for example, has over a trillian assests in US currency, mostly bond), the majority of the debt owners are … believe it or not, Americans (from individuals to banks/corporates to state/city governments). They count for more than 75% of all federal debt.

So, it’s really that Americans are lending themselves money all these years and also enjoying large dividends when the economy is doing well. There was a long debate whether this borrowing-on-yourself is sustainable. It certainly makes little sense to average people. But it has been proven working well till about right now. I guess the key is not really blaming this or that for this moment. What is on the line is whether America as a economic giant will lose it’s title and fall from grace. If the world lose faith and respect to the American capital system, you can bet that your life standard is going to decline rapidly.

On the other hand, I doubt it gonna happen. The reason being that the US is still a military super power and it can still rob anyone it wants like the old British empire. UK only lost its strength after WWII when it sees its influence dwindled rapidly. It’s just not big enough to hold the after shock.

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