Neil Barofsky, special inspector general for the bailout program known as TARP, issued a report earlier this week with a mind-blowing number: $23.7 trillion. It's the amount, according to Barofsky, federal agencies have pledged as potential economic support since 2007.

On cue, some media outlets began squealing:            

  • The Cost of the Financial Bailout: A Cool $23.7 Trillion
  • U.S. Official Sees $23.7 Trillion Rescue Tab
  • Cost of Bailout Hits a Whopping $24 Trillion Dollars
  • Taxpayers Left With the Bill: Total of $24 Trillion

Fox Business News confidently declared Barofsky was "projecting that the bailout will cost you and I and every other taxpaying American out there $23.7 trillion. The scope is hard to imagine."

A few minor details
Yes, it is hard to imagine. And when you find yourself in an unimaginable scenario, there's a good chance you're, in fact, imagining things. Those who interpreted Borofsky's report as meaning taxpayers are on the hook for $23.7 trillion apparently missed his own clarification that "We explained that this doesn't mean the taxpayer is on the hook today for $23.7 trillion."

The sensational fourteen-digit number, you see, is pulled from both illogical assumptions and an incomplete view of the programs. As the New York Times explains:

[$23.7 trillion] includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

It also assumes that every home mortgage backed by Fannie Mae (NYSE:FNM) or Freddie Mac (NYSE:FRE) goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

The end of the world as we know it, in other words. Twenty-four trillion isn't the "cost" of anything. It's the sum of previous and potential outlays -- many of which have already been terminated, repaid, or will never implemented -- without any respect to corresponding assets or repayments ... let alone reality.

Assuming the cost could reach $23.7 trillion is no different that saying "Unemployment could hit 100% if everyone loses their job." Or "Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) may have gone bankrupt if we stopped using computers years ago." Or even "Elvis might be alive if he wasn't dead." Sensational, yes. Reasonable, no.

Think about it: Could all bank assets -- many of which are backed by real estate and other hard assets -- really become worth zero dollars and zero cents? If every inch of land in America became totally worthless, do you think you'll still be around to care about it? Can you envision a scenario short of nuclear Armageddon where every single bank in America fails? If so, may I offer you a hug?

Don't make it more painful than it already is
No one's trivializing the insanely large amount taxpayers could end up losing. It's both enormous and infuriating. General Motors, Bank of America (NYSE:BAC), Citigroup (NYSE:C), and AIG (NYSE:AIG) still hold vast sums that may never be repaid. And some programs, like mortgage modifications, are guaranteed money-losers that don't even seek repayment.

But when I wrote earlier this week that the "unprecedented flow of information -- a lot of it bogus -- greatly contributed to fear and panic," these types of misrepresentations out of context are exactly what I meant. No one has a clue exactly how much taxpayers are on the hook for -- only that it's a tiny, minute, fraction of $23.7 trillion.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Google is a Motley Fool Rule Breakers pick. Microsoft is a Motley Fool Inside Value selection. The Fool has a disclosure policy.