What would the bailout plan cost you?


Bernanke warned that a recession might come if the bailout plan did not pass. And as much as I like the idea of the government bailout of Wall Street -- I hate government interference in the free markets, and bailouts can encourage more bad behaviour. It is hard to get a good understanding of the cost of this Wall Street bailout plan. But I ran some numbers that I thought were interesting.

  • $700 billion cost of proposed plan
  • 305 million estimated number of Americans
  • $2,295 estimated cost per American
  • 151 million estimated workforce (excludes retirees, kids, etc.)
  • $4,635 per working American
  • $13.8 trillion estimated US gross domestic product
  • 5.1% cost of bailout plan in one year's domestic product
  • 13 days each American has to work to pay off bailout plan (5% of a year)




Considering we could be looking at a recession, and the economy normally grows 3% a year, this does not look so bad. A $700 billion dollar bailout would be equivalent to a one-year recession with a negative 2% growth rate. These calculations are a rough estimate of the impact of such a plan and gives one food for thought as to which is worse. So which would you prefer, a recession or a bailout?

Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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