You know that slow point in a game of Monopoly where you’ve spent all your money on property and need to pass Go a few more times to start building houses? That’s sort of how the recession works. People want to spend the money to make the game exciting again. People have things to spend the money on (and would love to jump start the realestate market.) But the money is gone and there is no credit market to speak of.
The bailout is sort of like adding a house rule where everybody borrows $500 from the bank and pays back later in the game when $500s are flying around like spare change. Now, as in Monopoly, somebody’s going to object that you shouldn’t change the rules in the middle of the game. That would be right—if it were just a game.
I don’t think this is an accurate metaphor. Perhaps it was in 2001. But the house already loaned out $500 bills to keep the game going. Everyone started buying houses. But then time came to start paying that money back. That’s the situation we are in now. Our national debt isn’t so bad at $10.7 trillion. Well, that assumes you don’t count the government guarantees on Fannie and Freddie, which roughly doubles that number (though taxes don’t fund that debt, just the shortfalls). AIG obligations add a bit. Our household debt is roughly equal to the national debt. All things totaled, our aggregate debt is around $53 trillion (which, unfortunately, is our future social security obligations, so good luck trying to verify that through google. I found this, but the source is dubious). We’ve maxed out. The monopoly bank has no more money.
It gets a little worse. Our future obligations via Social Security, Medicare, and Medicaid are huge compared to our current debt. As late as 2007, projections for these programs assumed continued growth in GDP. The payouts are roughly expected to be the same as those, but the funding prospects have dropped. This should concern everyone, because the problem isn’t really that far off. It’s possible that this downturn will last until then.
