The bailout of the nation’s financial institutions authorizes the U.S. Secretary of the Treasury to spend up to $700 billion to purchase bad mortgage-related debt.
Behind the news:
Can the average taxpayer afford to foot the bill? The Chicago Reporter analyzed data from the Federal Reserve to determine whether American households are in a position for the nation to assume such a debt, which would ultimately be paid in part through personal income taxes.
An estimated 177 million people paid income taxes in 2006, according to taxfoundation. org, a nonpartisan tax research group based in Washington, D.C. If the cost of the bailout was divided up among the number of taxpayers, each individual taxpayer would be responsible for $3,946–”a cost that many can afford, but which is a large chunk of the median income for many, particularly minorities.
According to a 2004 report by the Federal Reserve, many people have very few liquid assets and net worth. The median net worth for white families is $140,700, according to the report. However, it drops considerably for minorities, where the median net worth for African-American families is $20,600 and $18,600 for Latino families.
“Families should re-evaluate their budgets and cut back wherever possible [during this economic uncertainty],” said Rick Bryant, spokesman for Congressman Jesse Jackson Jr., an Illinois Democrat. “We should hope for the best and prepare for the worst. We can prepare for a deep and prolonged recession that could lead to a credit crunch and economic pain for American families.”