Sizing Up the Bailout
What is the U.S. $700 billion bailout package equivalent to in dollar terms?
December 1, 2008
A. U.S. defense budget
A. U.S. defense budget is correct.
U.S. defense spending has risen 72% in eight years, to $671 billion for fiscal year 2008. The United States could spend in excess of $700 billion on defense in 2009, more than double the amount spent in 2001.
That represents more than 50% of all global spending on the military — and 17 times U.S. spending on diplomacy and foreign aid.
B. U.S. trade deficit is correct.
From January 2008 through October 2008, the U.S. trade deficit reached approximately $700 billion.
Looking ahead, there are signs that the U.S. trade deficit may be narrowing, as the declining economy has caused imports to slow. For example, in September 2008, imports posted a record 5.6% drop to $212 billion — while exports declined 6.1% to $155 billion, the largest decrease since September 2001.
C. U.S. oil imports is incorrect.
Even though the United States accounts for just 4.5% of the world population, it consumes 21 million out of the 85 million barrels of oil produced around the world every day — or about 25% of the world total. It is expected that the United States will spend roughly $500 billion on oil imports in 2008 (depending on the price of oil) — nearly twice as much as in 2005. Of this, nearly 40% will come from Canada, Mexico, Brazil, Colombia and the United Kingdom.
Given that the United States has less than 3% of the world’s oil reserves, the increasing demand for oil could only be satisfied by rising imports. While imports were just 24% of total demand back in 1970, they now run at a level of close to 70%.
D. A stack of dollar bills 52,000 miles high is correct.
A stack of 700 billion dollar bills would be about 52,000 miles high — roughly one-quarter of the way to the moon. In addition, 700 billion dollar bills placed end-to-end longwise would stretch 65 million miles, or two-thirds of the way to the sun.
Finally, the bailout package of $700 billion is slightly below the $829 billion value of all the U.S. banknotes and coins now in circulation worldwide.
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