Can YOU afford the bailout costs?


Henry K. (Bud) Hebeler



So how much do the government mortgage based bailouts cost the average person who pays income tax?  There are roughly 80 million people who pay income tax.  Each trillion dollars of bailout therefore requires the average taxpayer to “invest” $12,500 in the bailout program.  At the onset, we know that at least a third of that is a pure give away and not an investment at all.  The remainder of these “investments” is very risky.  They are so risky that private capital won’t invest in them.  They are worth less than junk bonds on a risk scale.


Many people that are reading this may have twice the amount “invested” because of the progressive tax structure.  Look at the mortgage bailout as if this is what you might spend on your next automobile.


OK, so how much do we have to “invest” in the initial $15 billion bailout of the auto industry?  That’s an average of about $200 for each income tax payer.   This in only the down payment.  The minimum “investment” for the average taxpayer will be more than two and a half times that, or $500.  Even that is based on a quick recovery for the auto industry and getting price competitive vehicles.  I personally don’t believe either will happen.  The president of Northrup once told me that sometimes you have to effectively burn down the plant to get something different.  In this case, you also have to trim union restrictions, wages, and health and retirement benefits.


$500 is just the start, not only because the auto companies will need much more.  These requests will be followed by many other claims from states, cities, credit card lenders, exporters, and failing companies followed by the Pension Benefit Guarantee Corporation.  Look for bailouts, unemployment benefits, refundable tax credits, infrastructure repair, tuition subsidies and other things to double the size of the national debt.  What will that cost?  At 4% interest rate, that’s $10,000 every year for the average tax payer.  Maybe the cost will be twice that for many readers because of the progressive tax structure.


But that’s not the worst.  It’s not even the Social Security shortfall.  If this is not changed significantly immediately Social Security will double the national debt by itself.  It’s Medicare and health care for the uninsured. Right now Medicare outlays exceed the government’s income from payroll taxes and Part B and D deductions.  That’s got to grow as our population ages—and those baby boomers are coming at us fast.


In addition, we’re going to add 47 million people to the insured medical care list, most are not going to pay for it and, if they get the same coverage as Congress, it will be better coverage than most of the working taxpayers get.


Then there are the long-term effects of the shortage of future doctors.    The medical schools are far short of students willing to get into general practice because the wages don’t justify the investment.  That means just one thing.  The rest of us will get rationed care—just like in Europe and Canada.  Prepare to stand in a long line, folks, for that MRI or cat scan or to get an appointment with your doctor.


Consider also and the general demographics.   Demographers expect that there will be only two wage earners for every person over 65 in twenty years instead of three wage earners for every person over 65.  Unless virtually everyone works past age 70, that means that each taxpayer will have a 50% greater tax load.


At least we’ll all be able to look back on times when the maximum tax rate was only 35% for part of our life.  The future, I’m afraid, will have the government taking much more than half of our money and deciding what to do with it.  We’re almost at 50% now if you consider the total of federal, state, and local taxes combined with the costs of satisfying government regulations.


Don’t get mesmerized by the claims of industry and the government that increased consumerism and readily available loans will solve the current problems.  They will only make it worse.  Consumerism and the lack of savings is what got us into this problem in the first place.  We should take our medicine now and not leave future generations in poverty with most of their income going to pay government debt.


Remember when the financial experts said not to worry about the low savings rates?  At various times they cited reasons such flawed reasons as (1) stock values had grown so much that new savings aren’t necessary, (2) this generation is going to have record inheritances (true for Bill Gates and Warren Buffett), and (3) our house values have increased to the point where they will compensate for low savings rates.  Now we have reason number (4):  An increase in consumerism will stimulate economic growth.  Oh?  What about savings?


One financial firm representative said that there was no point in reducing tax rates.  He said that would only get people to “hoard” the extra income from lower taxes.  I don’t call it “hoarding,” I call it saving, and that’s what the wise will do.  Then those individuals who save will be able to pay that tax bill and have something left over for the ice cream parlor!  The rest will live in hutches with linoleum floors and sheet metal roofs.