States Forced to Cut Services to the Bone: The Opportunity Cost of the Bank Bailout

Courtesy of Benign Brodwicz at The Animal Spirits Page

Via: Huffington Post  If you haven’t written and called your Congressional rep’s and your President, it’s past time to do so.  Arianna Huffington should like the Benign Brodwicz program for the economy.

Okay, the bailout of Wall Street isn’t going to end up costing us $23.7 trillion dollars, the number that special inspector general Neil Barofsky fired off to call attention to the fact that banks are misusing the trillions we’ve given them, and are still hiding untold amounts of toxic assets off the books — aided and abetted by the who-needs-transparency Treasury.

But we have pumped at least $4.7 trillion into the financial sector — and the pumping isn’t over. On Wednesday, Fed chair Ben Bernanke told the Senate Banking Committee that it "may be appropriate" for the government to guarantee the "mountains" of commercial real estate mortgage defaults the banks will likely be facing in the coming months.

At a certain point, these numbers are so huge it becomes hard to keep them in perspective, to be clear what $4,700,000,000,000 means in the real world. But reading about the effects of the massive budget cuts almost every state in the country is being forced to make puts the figure in perspective very fast.

And it reminds us, once again, how lopsided the "recovery" has been: with banks that received billions in taxpayer handouts now reporting massive profits and setting aside record amounts for executive bonuses, and the American people continuing to face 9.5 percent unemployment, 10,000 foreclosures a day, and vital services being cut.

So while Goldman Sachs crows about its $3.44 billion second-quarter profit, and Citigroup and Bank of America strut over the $3 billion and $2.4 billion they respectively earned, we are left to think about the opportunity cost of the trillions we have given to Wall Street — to ponder what else we could have done with that money.

Consider:at least 39 states have imposed budget cuts that hurt families and reduce vital services to their most vulnerable residents. The litany of those affected includes children, the elderly, the disabled, the sick, the homeless, the mentally ill, as well as college students and faculty, and state government workers.

America’s states are facing a projected cumulative budget gap of $166 billion for fiscal 2010. Even more budget gaps are expected for fiscal 2011. Total shortfalls through 2011 are estimated at $350 billion to $370 billion — and could be even higher if unemployment continues to rise.

These are massive numbers. But when you remember that we spent $180 billion to bail out AIG ($12.9 billion of which went straight to Goldman), you realize that that alone would be more than enough to close the 2010 budget gap in every state in the union. Toss in the $45 billion we gave to now-making-a-profit Bank of America and the $45 billion we gave to now-making-a-profit Citigroup and we are well on the way to ensuring that no state’s vital service are cut through 2011.

But instead that money has gone to the banks without any fundamental reform of the system, and without any strings attached about how much they had to turn around and lend to help the real economy recover. Or, indeed, without any strings attached about having to tell us what they did with our money. So all across the country the fiscal ax is falling.

According to a report by the Center on Budget and Policy Priorities, at least 21 states have made cuts to public health programs, 22 states have cut programs for the elderly and disabled, 24 states have cut aid to K-12 education, and 32 states have cut assistance to public colleges and universities.

The devastation is in the details:…

It’s a perfect storm of suffering…

Read Huffington Post article here.