In the fall of 2007, when the U.S. economy first seemed in peril, I began answering reader queries here on the Business Desk. I still do so occasionally, but this page has expanded to include posts from eminent economists, "far-flung correspondents," and a variety of voices that have intriguing and/or useful things to say about economics, broadly defined. Please feel encouraged to respond to any and all of them.
Kindly explain just how the U.S. taxpayer will be asked to cough up nearly $ 1 trillion to pay for this bailout?
Question/Comment: Kindly explain just how the U.S. taxpayer will be asked to cough up nearly $ 1 trillion to pay for this bail out? Nobody has spelled this out in detail as far as I know. Can we expect our taxes to be doubled and if so over what period of time, etc? Would appreciate your reply in English. Thank you.
Paul Solman: Je prefere a reponder en Francais. But okay, you asked for English, which is my native language as luck would have it, so let me give it a whirl.
Let's say we borrow the money for the bailout(s). That means interest on, to use your number, $1 trillion dollars. Right now, the U.S. is paying about 4% on borrowed money. Using that as a not-totally-made-up number, some $40 billion a year in new interest.
Right now, the U.S. taxpayer tab comes to about $2 trillion a year, not counting corporate taxes. $40 billion is 2% of that. So borrowing an extra trillion should add a mere couple of percent to our taxes. For the average U.S. family, that's something less than $400 a year. For the median family (50% of the population make more than the median, 50% make less), it's an even lower number. A bargain if it avoids a Great Depression, wouldn't you say? Of course, if it doesn't...