How much spending does it take to get to the center of the US Recession?

Early Tuesday morning, the federal government announced a new, massive $800B program to buy up bad debt and pump money into the sagging credit markets. According to a NYTimes article entitled: “U.S. Unveils New Programs to Ease Credit,” the program would be structured as follows: “The Federal Reserve said that it would buy up to $600 billion in mortgage-backed assets from the government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. The agency would also buy up to $100 billion in debt directly from the companies and up to $500 billion in mortgage-backed securities.”In addition, the Fed and the Treasury unveiled a different $200B package to help commercial lending (car loans, student loans, etc).
The NYTimes article describes the move as: “The action by the Federal Reserve on buying mortgage-backed securities brings the full force of monetary policy to bear on the credit markets. Having already reduced the benchmark federal funds rate to just 1 percent, the central bank is now effectively using what economists call “quantitative easing” to reduce the costs of money.Instead of trying to reduce overnight lending rates in the hope of influencing longer-term interest rates for things like mortgages, the Fed is directly subsidizing lower mortgage rates. It is doing so by printing unprecedented amounts of money, which would eventually create inflationary pressures if it were to continue unabated.”
It begs the question though: how much spending is going to occur as a result of the crisis? With additional programs, government spending is piling up quickly: $700B banking bailout plan, $50-$150B on the Citi bailout, the new $800B credit program, $200B commercial lending program, the looming question of government-backed aid package to the American auto industry, and talks of additional stimulus packages being put into place.
The NYTimes article stated that: “Democratic leaders in Congress are gearing up to move quickly on an economic recovery package that aides said could cost more than $500 billion. The goal is to have a legislative package approved by the House and the Senate and ready for Mr. Obama to sign, perhaps on his first day in office, in January.”
Clearly, with such unprecedented spending, it begs the question what is the net result when it is all said and done, and is the federal government overcompensating? Obama has already issued some ‘belt-tightening’ language such as: “’The economy’s likely to get worse before it gets better,’ Mr. Obama said. “Full recovery will not happen immediately. And to make the investments we need, we’ll have to scour our federal budget, line by line, and make meaningful cuts and sacrifices.’” However, even with his proposed reduced military spending, there is still going to be grossly over budget with the proposed programs being implemented. US Markets remained turbulent today and are currently relatively even. Emerginvest will be extremely interested to see how the proposed plans are both structured and carried out in the upcoming months as the Obama administration transitions into the White House.

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