The White House Office of Management and Budget projects the federal deficit to be $9 trillion over the next 10 years. That’s pretty scary, but columnist Jill Lawrence, whom I suspect is an Obama supporter, couldn’t help but point fingers at President Bush:
What they are not discussing is how we ended up in a hole this deep. Two words and an initial: George W. Bush. Clinton bequeathed a $281 billion budget surplus to Bush in 2001. Bush racked up a record $438 billion deficit for the fiscal year that ended Sept. 30, 2008 — the product of economic doldrums aggravated by his big tax cuts, two wars and a new Medicare prescription drug benefit financed on borrowed money. Then came last fall’s economic collapse, and “things fell off a cliff,” said economist Alan Auerbach, director of the Burch Center for Tax Policy and Public Finance at the University of California, Berkeley. Bush’s final deficit estimate for this year was $1.2 trillion.
She did mention two wars, but not 9/11 where the world’s financial center, New York City, and political center, Washington, D.C., received devastating blows from terrorists. Bush did break records in spending during his tenure, but it’s starting to get old when Obama and his supporters keep blaming Bush for the recession.
President Obama wanted the job, and he got it. Part of the job is to fix the economy, among many other things. Excuses are like a-holes — everybody’s got one. Be the president, don’t blame the ex.
Did the rushed stimulus package help? Did cherry-picked nationalization work? The Dow has recovered past 9,500, and there are positive signs in the housing sector. But don’t celebrate yet — a rising deficit, exploding national debt, and increasing unemployment rate are the dark clouds that loom above our heads. NYU economics professor Nouriel Roubini warns about the possible double-dip recession around the corner:
There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).
But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.
Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.
The federal government, by nature, has no wealth. All the money comes from tax revenues. Government programs run on taxpayer funds. The stimulus package isn’t money out of nowhere — it is money out of your wallets. Was it necessary to prevent a total financial collapse? Many seems to have thought so. But as Mark Steyn tells us, countries with minimal government intervention are now recovering, unlike those with extensive “stimulus” packages:
Meanwhile, in Brazil, India, China, Japan and much of Continental Europe, the recession has ended. In the second quarter this year, both the French and German economies grew by 0.3 percent, while the U.S. economy shrank by 1 percent. How can that be? Unlike America, France and Germany had no government stimulus worth speaking of; the Germans declined to go the Obama route on the quaint grounds that they couldn’t afford it.
They did not invest in the critical signage-in-front-of-holes-in-the-road sector. Yet their recession has gone away. Of the world’s biggest economies, only those of the U.S., Britain and Italy are still contracting. All three nations are big stimulators, though Prime Ministers Gordon Brown of England and Silvio Berlusconi of Italy can’t compete with Mr. Obama’s $800 billion porkapalooza. The president has borrowed more money to spend to less effect than anybody on the planet.
Eye opening, yes? The equation must be balanced, and President Obama’s plan of taxing the rich is not enough. Guard your wallets, because the definition of rich is going to change soon in order to finance Obama’s economic policies.
