Following the Bailout Bills – And Their Costs
When Congress gets a head of steam with something like the financial services bailout proposals, its procedures can get really hard to follow. So here’s a quick look at what’s going on.
In the House last Sunday, the bailout language was copied into H.R. 3997, which used to be a bill dealing with tax relief for members of the uniformed services, volunteer firefighters, and Peace Corps volunteers.
In the Senate yesterday, the bailout language (and more) was copied into H.R. 1424, which used to be a bill dealing with whether mental health and substance-related disorder benefits would be covered under group health insurance plans.
These two bills have been updated in our database to reflect their new status as bailout proposals. (Summaries of the bills in their wiki articles still reflect their old content. These will be updated automaticaly when the Congressional Research Service issues new summaries, or when an intrepid wiki editor takes over.)
Now, as to cost: On Sunday, a cost estimate (of sorts) for the House bill came out of the Congressional Budget Office. It said:
Under the [Troubled Assets Relief Program], the Secretary would have the authority—if deemed necessary to promote stability in the financial markets—to purchase any financial asset at any price and to sell that asset for any price at any future date. That lack of specificity regarding how the authority would be implemented and even what types of assets would be purchased makes it impossible at this point to provide a meaningful estimate of the ultimate impact on the federal budget from enacting this legislation. Although it is not currently possible to quantify the net budget impact given the lack of details about how the program would be implemented, CBO has concluded that enacting the bill would likely entail some net budget cost—which would, however, be substantially smaller than $700 billion.
This is far from a precise estimate, obviously. I have assumed that it concludes that the plan will cost $350 billion – half the total spending authority – and that the costs will be incurred over the next two years. Based on other language in the estimate, I added $3 billion per year in administrative costs over ten years. This results in an estimate on both bills of a little over $3,700 per family, or about $1,200 per person.
[Update: There is now a CBO estimate for the Senate bailout bill. It lacks specificity like the estimate for the House bill, but the additional provisions added to the bill would generally lower revenues (taxes), so the estimate comes to about $2,800 per family, or $900 per person.]
This is quite a bit lower than my estimate of the cost, and I think it is more likely for costs to be higher, but the effort here is to faithfully report what the government estimates.
The House comes in at noon Eastern today – and the hijinx continue!