Back in July, Neil Barofsky, special inspector general for the Treasury Department’s Troubled Asset Relief Program, better known by the acronym TARP, warned that the vast amount of taxpayer money already spent on banking and corporate bailouts, with the addition of guarantees and backstops for the financial industry, meant that in a worst case scenario, the United States would face $23.7 trillion in liabilities. In the weeks since this apocalyptic estimate was uttered by Barofsky before a congressional committee, scant attention has been paid by the public and mainstream media. But they owe it to themselves to be more attentive.
The number presented by Barofsky dwarfs the annual GDP of the U.S., currently at $14 trillion. It is double the national debt of the United States, standing at present at around $11.7 trillion. Now, many will suggest that this is just a worst case scenario, and things will probably never get this bad. But what if they did? Already, trillions of dollars have been committed by the Treasury, Federal Reserve and Congress to repair the severe damage to the banking and financial system, bailout Detroit automakers and fund economic stimulus packages. And yet, despite official boasting about economic “green shoots,” the global economy remains very fragile and susceptible to future shocks.
If the commercial real estate sector implodes as many of us believe it will, than Barofsky’s worst case scenario is no longer just a marginal possibility. If the ultimate cost to the United States of the global economic crisis approaches anywhere near the sum of $23.7 trillion, than it will be Washington that is in need of a bailout. Only problem with that scenario, the IMF is nowhere near big enough to take on the debt crisis of the United States.