Measuring the True Cost of Government Bailout

Cheryl D. Block | 88 Washington University Law Review 149 (2010)

Government Intervention to assist individual businesses and industries during the 2008–2009 economic crisis was extraordinary in variety and scope. Despite official protestations of “no more bailout” in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, future government interventions are inevitable, should economic circumstances become sufficiently dire. Moreover, even if Congress eliminates overt bailout-type interventions, indirect forms of public bailout are likely to continue. Understandably, taxpayers have been concerned about the cost. A simple tally of dollars authorized or disbursed is wholly inadequate to accurately assess the costs of various interventions. The federal government’s ad hoc and fragmented approach has made it extremely difficult to get a clear picture of aggregate spending dedicated to bailout-type relief. To make informed decisions about allocation of government bailout resources, policymakers should work with a federal budget that includes complete information about the relative costs of overt bailout-type programs, whether implemented through “on-budget,” “off-budget,” or “off-off budget” entities. When rescue efforts include a long-term government ownership interest of particular companies, those companies should be incorporated into the budget. Also accounting methodologies of different government agencies and programs should be harmonized so Congress can make fair comparisons. more…