Pop Quiz: How much money has the federal government committed to all of the programs it’s enacted to dig us out of the subprime mortgage-induced recession?

A ballpark estimate is fine. 

One trillion?

 Two?

 Five? 

More?

Frankly, it’s hard to pin down. The number you come up with depends upon when you begin counting. Is your starting point October’s passage of the Emergency Economic Stabilization Act? That legislation included $700 billion  for the Troubled Asset Relief Program (TARP) aimed at stabilizing the banking and investment sectors as well as $150 billion in tax incentives for individuals and businesses.

But don’t forget, in February of last year we also got the Economic Stimulus Act of 2008. Those tax rebates cost the Treasury $168 billion.

Which programs do you include? How about the $28.6 billion the Federal Deposit Insurance Corporation has shelled out to take over failed banks since the start of last year? Then there’s $8 billion to extend unemployment benefits.

Another $130 billion to buy student loans from private lenders so they have the cash to make new loans.

The price tag on the American Recovery and Reinvestment Act of 2009 is $787 billion. Among other things, it calls for spending $150 billion on new infrastructure, a $600 million to increase energy efficiency, $100 million to upgrade public housing, $95 million on housing for the elderly and disabled, $5.6 billion to make federal buildings “green,” $55.5 billion to provide for a tax credit for lower- and middle-income families, and $176 million to expand and upgrade U.S.D.A. laboratories in 29 states. 

There’s also $13.6 billion for HUD. to spend to upgrade public housing.

Let’s not forget more than $25 billion spent to prevent a messy meltdown of G.M. and Chrysler. Oh, last month the president signed legislation expanding the “Hope for Homeowners” program by providing FHA with an additional $300 billion to help to folks facing foreclosure.

However, even if you add up all of the above, the total pales compared to the $6.2 trillion that the Federal Reserve alone is potentially on the hook for in terms of loans and guarantees.

Of course, in addition to special programs, and incentives aimed at jumpstarting the economy, there are still the routine expenses the government has- everything from air traffic controllers, the FBI, Homeland Security, the military, the federal court system, Centers for Disease Control the list goes on and on.

Dare I add the looming issue of funding Social Security and Medicare?

And, what the heck, let’s toss in the just introduced “health-insurance-for-all” bill with an estimated price tag of $1 trillion.

Just as a reminder, here is what one trillion dollars looks like:

$1,000,000,000,000

Mind-boggling, isn’t it? Frankly, government officials have been speaking in terms of unfathomable amounts of money for more than a year now. Most of us have not only lost track of the total, we’ve become numb to the numbers. They’re simply too large to relate to. So what if Congress passes new “handout” legislation? What’s a few hundred billion more?

Just keep in mind that the money the government spends has to come from somewhere. Either the bills are paid out of current revenue (taxes) or with borrowed money (which has to be paid back with future taxes).

So, although your home may have gone down in value a bit and we’re (thankfully) paying a lot less for a tank of gas than we did a year ago, the long-term issue is not deflation, i.e. declining prices.

It’s inflation.

In order to borrow the money it needs to pay for the commitments it’s making, the federal government will have to make it worthwhile for someone (individuals, institutions, foreign governments) to lend it. That means eventually paying higher interest rates on Treasury securities. This will lead to higher interest rates on other types of bonds and bank accounts since they have to remain competitive.

There will be pressure to print more money in order to pay down the debt the government owes. That, too, is inflationary. Currency is just like any other commodity: the more there is, the less valuable it becomes. So sellers raise their prices to compensate.

Next week: if interest rates are headed higher, consider adding a ladder to your portfolio.

If you have a question for Gail Buckner and the Your $ Matters column, send them to: yourmoneymatters@gmail.com, along with your name and phone number.