On March 25th, 2020, the U.S. Senate passed a version of the C.A.R.E.S. Act (which stands for Coronavirus Aid, Relief, and Economic Security). Two days later, Trump signed a modified version of that bill into law.
On March 25th, former M.S.N.B.C. host Dylan Ratigan appeared as a guest on Jimmy Dore's podcast to explain the total cost of the bill and the economic consequences of Coronavirus and Covid-19.
The video of that interview is available here:
http://www.youtube.com/watch?v=4NgOQn4Asa0
The video of that interview is available here:
http://www.youtube.com/watch?v=4NgOQn4Asa0
The Congressional Budget Office estimates the cost of the C.A.R.E.S. Act at just $1.76 trillion. Unfortunately, however, there doesn't appear to be widespread consensus about whether the total cost has amounted to $1.76 trillion or $2.2 trillion. In mid-April, TheHill.com reported that the bill would cost $1.76 trillion, not $2.2 trillion. Wikipedia puts the total cost at $2.2 trillion.
The total cost of the C.A.R.E.S. Act is certainly confusing, and needs to be discussed and debated more. Especially considering Dylan Ratigan's view on the matter. Ratigan stated on Jimmy Dore's show that he believes the total cost of C.A.R.E.S. is a whopping $14 trillion!
If this is accurate, then the C.A.R.E.S. Act could be a repeat - an echo - of the 2008-09 financial crisis. During that time, American economic researchers were debating whether the true cost of the bailouts was either $2.1 trillion, or $10.2 trillion, or $12 trillion, or $29.6 trillion.
Some even used the bailouts as an opportunity to point out the increasing entanglement of American banks with European banks involved in the European sovereign debt crisis. This is important because most American's have never heard the phrases "Major Fiscal Exposure" and "Major Reported Fiscal Exposure". Exposure refers to the decrease in a government's value, and/or to the risk that a government's cash flow could suffer (as a result of currency fluctation and other factors).
For the purposes of this article, I make reference to the term "exposure" to refer to the total cost of the federal government's long-term spending plans, for as long into the future as it has planned to spend (with both funded and unfunded liabilities included).
For the purposes of this article, I make reference to the term "exposure" to refer to the total cost of the federal government's long-term spending plans, for as long into the future as it has planned to spend (with both funded and unfunded liabilities included).
The United States federal Government has planned $4 trillion or more each year over the next 75 years. This amounts to a 75-year exposure of $300 trillion or more. Some people are aware that this is a problem; that's because we have "unfunded liabilities" that result from not knowing how to fully pay for all of that spending.
We certainly don't want an echo of 2008-2009, and we certainly want to make sure that the government stays fully funded (but doesn't grow too large and unwieldy) in the years to come.
Let's review the numbers, to keep them all fresh in our heads before we go over what Ratigan said about the total cost.
The low estimate of the total cost of the C.A.R.E.S. Act (given by the Congressional Budget Office) is $1.76 trillion.
The high estimate of the total cost of the C.A.R.E.S. Act is $2.2 trillion.
The Paycheck Protection Program (P.P.P.), which followed the C.A.R.E.S. Act., had a total cost of $349 billion.
This puts the total cost of the C.A.R.E.S. Act and the P.P.P. combined, at somewhere between $2.09 trillion and $2.549 trillion.
Dylan Ratigan stated that the total cost would be more like $14 trillion.
Ratigan says that the combined cost would be about $14 trillion, because it is his understanding that the combined cost of all the late March and early April spending by the federal government, the Department of the Treasury (which sells bonds and securities to finance the debt), and the Federal Reserve Bank (the central bank that loans money to banks), would end up being approximately $14 trillion.
That estimate is based on the following three claims, which Ratigan made on the show:
1. The Federal Reserve Bank said that it would offer $1 trillion of overnight loans, every day until the end of March. Ratigan explained that these loans achieve what is called "back-stopping". In a back stop, a bank or investment firm commits to providing a last-resort support, such as a security in a securities offering, in order to guarantee that a company or bank will raise the money it intends to raise. The purpose of these overnight loans would be to, as Ratigan said, "make sure the banks have what they need to do what they want", by which he meant it makes sure the banks have the money they need to put where they think they need to put it. Ratigan said the Fed was giving banks $4 trillion to do what they want, so presumably these payments took place on March 28th, 29th, 30th, and 31st.
2. The Federal Reserve Bank is offering $1 trillion in 14-day loans, each week. It is unclear from Ratigan's statements whether this began on March 25th, or the 27th, or on a different date. Ratigan said that the bank also wanted to "put up $4 trillion in loan guarantees", so presumably there were, or there were supposed to be, four weeks in which $1 trillion per week was available to banks in the form of two-week loans.
3. The Federal Reserve Bank (or perhaps the Treasury, it was unclear) "wants to put up $6 trillion directly." It is unclear what Ratigan meant by "put up".
To put Ratigan's claims in perspective, and to help explain them better, we'll now look at where the claims about multi-trillion bailout costs are coming from.
This article from CNBC, from June 2020, said the Federal Reserve hadn't come close to spending $2.3 trillion:
http://www.cnbc.com/2020/06/24/the-fed-said-it-could-supply-the-economy-with-2point3-trillion-it-hasnt-come-close-so-far.html
But this New York Times article from March 26th discusses a $4 trillion figure:
http://www.nytimes.com/2020/03/26/business/economy/fed-coronavirus-stimulus.html
I regret not being able to provide more information on Ratigan's 3rd point (about the $6 trillion that the Fed wants to "put up directly"). And it would seem that no reputable news source would admit to a much higher cost. But that all depends on whether you consider the New York Times, C.N.B.C., or Dylan Ratigan, a more reputable source for news.
I wish I could provide a more in-depth analysis of these figures, but that is all the information which I am able to glean about the topic. I provide this information here, to concisely explain Ratigan's views, and to bring together as many statistics as possible regarding the total cost of the C.A.R.E.S. Act and the 2020 bailouts.
I apologize if any information is inaccurate or incomplete.
My hope is that other readers and researchers can use this information, fact-check it, and message me to discuss and debate the real total cost. If you would like to e-mail the author, e-mail Joe Kopsick at jwkopsick@gmail.com
Let's review the numbers, to keep them all fresh in our heads before we go over what Ratigan said about the total cost.
The low estimate of the total cost of the C.A.R.E.S. Act (given by the Congressional Budget Office) is $1.76 trillion.
The high estimate of the total cost of the C.A.R.E.S. Act is $2.2 trillion.
The Paycheck Protection Program (P.P.P.), which followed the C.A.R.E.S. Act., had a total cost of $349 billion.
This puts the total cost of the C.A.R.E.S. Act and the P.P.P. combined, at somewhere between $2.09 trillion and $2.549 trillion.
Dylan Ratigan stated that the total cost would be more like $14 trillion.
Ratigan says that the combined cost would be about $14 trillion, because it is his understanding that the combined cost of all the late March and early April spending by the federal government, the Department of the Treasury (which sells bonds and securities to finance the debt), and the Federal Reserve Bank (the central bank that loans money to banks), would end up being approximately $14 trillion.
That estimate is based on the following three claims, which Ratigan made on the show:
1. The Federal Reserve Bank said that it would offer $1 trillion of overnight loans, every day until the end of March. Ratigan explained that these loans achieve what is called "back-stopping". In a back stop, a bank or investment firm commits to providing a last-resort support, such as a security in a securities offering, in order to guarantee that a company or bank will raise the money it intends to raise. The purpose of these overnight loans would be to, as Ratigan said, "make sure the banks have what they need to do what they want", by which he meant it makes sure the banks have the money they need to put where they think they need to put it. Ratigan said the Fed was giving banks $4 trillion to do what they want, so presumably these payments took place on March 28th, 29th, 30th, and 31st.
2. The Federal Reserve Bank is offering $1 trillion in 14-day loans, each week. It is unclear from Ratigan's statements whether this began on March 25th, or the 27th, or on a different date. Ratigan said that the bank also wanted to "put up $4 trillion in loan guarantees", so presumably there were, or there were supposed to be, four weeks in which $1 trillion per week was available to banks in the form of two-week loans.
3. The Federal Reserve Bank (or perhaps the Treasury, it was unclear) "wants to put up $6 trillion directly." It is unclear what Ratigan meant by "put up".
To put Ratigan's claims in perspective, and to help explain them better, we'll now look at where the claims about multi-trillion bailout costs are coming from.
This article from CNBC, from June 2020, said the Federal Reserve hadn't come close to spending $2.3 trillion:
http://www.cnbc.com/2020/06/24/the-fed-said-it-could-supply-the-economy-with-2point3-trillion-it-hasnt-come-close-so-far.html
But this New York Times article from March 26th discusses a $4 trillion figure:
http://www.nytimes.com/2020/03/26/business/economy/fed-coronavirus-stimulus.html
I regret not being able to provide more information on Ratigan's 3rd point (about the $6 trillion that the Fed wants to "put up directly"). And it would seem that no reputable news source would admit to a much higher cost. But that all depends on whether you consider the New York Times, C.N.B.C., or Dylan Ratigan, a more reputable source for news.
I wish I could provide a more in-depth analysis of these figures, but that is all the information which I am able to glean about the topic. I provide this information here, to concisely explain Ratigan's views, and to bring together as many statistics as possible regarding the total cost of the C.A.R.E.S. Act and the 2020 bailouts.
I apologize if any information is inaccurate or incomplete.
My hope is that other readers and researchers can use this information, fact-check it, and message me to discuss and debate the real total cost. If you would like to e-mail the author, e-mail Joe Kopsick at jwkopsick@gmail.com
Chart comparing the sizes of the 2008-09 bailouts and the 2020 bailouts,
and several other government budget statistics.
Click, and open in new tab or window, to see in full detail
Written and Published on September 6th, 2020
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