2008 Changes Meaning of a Billion Dollars
Often I end the year with a column on memories of New Years Eve’s from years past. This year one story eluded comment in the press and public and was so obvious and yet unspoken that I just could not resist. Beyond reporting of the Presidential election and the current financial crisis, the disturbing thought that occurred to me is that 2008 may be the year when we revised our thinking what a billion dollars means.
Most Americans, despite our overall spendthrift habits, were raised to believe that saving is the answer to buying a piece of the American dream. If we worked hard, invested properly, spent wisely, and saved, we would, on retirement, look forward to a modest, yet comfortable lifestyle.
This notion took some serious hits. First, overall we purchased more than we should and allowed too much of this debt to be secured by residences. Then, some, especially upper level management with major corporations, acquired unheard of wealth by comparison with average citizens. Those differences were accentuated when defined benefit pensions that provided a secure income to many Americans on retirement were replaced by 401(k), 403(b) and similar plans that are subject to the vagaries of the market.
Personal responsibility has been the term to describe our spending standards. If we made poor financial choices, then we should be punished, so to speak, by lower savings. This seems to still be the rule today except that, for those companies and those individuals that make horrendous errors in judgment involving huge sums of money, the rules changed. This conclusion brings me to my original point regarding what a billion dollars represents.
I have known for several years what a billion dollars in the federal budget represents to me. This has been the goal for federal funds to subsidize National Institutes of Health research for a cure for Alzheimer’s disease – a billion dollars to search for a cure for a disease that is projected to cost $160 billion dollars in taxpayer dollars for treatment by the year 2010. See Alzheimer’s Association website, http://www.alz.org/publicpolicyforum/08/downloads/Federal_Funding Alz_%20research.doc. This goal has been repeatedly pushed to the side over the past several years despite support from Nancy Reagan, among others. The theory was that the $1 billion cost was too high.
Five billion dollars or an average of $1 billion per year from 2006 to 2010 was to have been the Medicaid savings from passage of the federal Deficit Reduction Act. Readers might recognize this as the law that dramatically changed Medicaid by restricting what future Medicaid recipients could give to their families and still qualify for Medicaid within five years after. Unless some exception applies, Pennsylvania restricts giving to a total of $500 per month which makes Christmas gifts by grandparents a concern if grandparents need help later. The projected savings to the government do not appear to have been realized.
It may be that the bail-out for various corporations has been necessary to keep the economy moving but here are some examples of dealings for more than a billion dollars. Note that government is not the only player.
- In May, 2008, beleaguered Bear Stearns was bought by J.P. Morgan Chase with help of a non-recourse Federal Reserve loan for $29 billion.
- In September, 2008, the U.S. took over Fannie Mae and Freddie Mac that insured home mortgages and pledged $100 billion.
- Also in September, AIG, the largest American insurance company and an insurer of the mortgage securities, received $150 billion in exchange for the government receiving an ownership interest.
- In September, 2008, the Bush Administration requested $700 billion for the Treasury to keep the economy going. After much debate in Congress, the bailout passed in October, 2008.
- In December, 2008, a requested $14 billion bailout for U.S. auto manufacturers failed to pass Congress. Following this, the Administration offered $17.4 billion in loans with requirements that they meet viability standards by March 30, 2009.
The story continues and will continue into the Obama administration with a stimulus package proposed.
Years ago, Evererett Dirksen, a moderate Republican Senator from Illinois, was reputed to have said “A billion here, a billion there and pretty soon you’re talking about real money.” Questioned on it later, he commented that, although he did not say it “<he> thought it sounded so good that <he> never bothered to deny it.”
When spending we will need to know that money goes where it will do the most good but, regardless of outcome or blame, we might never look at a $billion in the same way again.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.