President-elect Barack Obama on Tuesday braced Americans for the unparalleled prospect of “trillion-dollar deficits for years to come,” a stark assessment of the economic condition facing the country that he said would force his administration to impose tighter fiscal discipline on the government.
Mr. Obama sought to draw a distinction between the need to run what would likely be record deficits by any measure for the next several years and the necessity to begin bringing them down substantially in following years. Even as he prepares a stimulus package that is likely to total in the range of $800 billion in new spending and tax cuts over the next two years, he said he would seek to make sure that money is used wisely and that he would work with Congress to implement spending controls and efficiency measures throughout the federal budget.
“I’m going to be willing to make some very difficult choices in how we get a handle on his deficit,” Mr. Obama said, speaking about the dire fiscal outlook as he met with his top economic advisers for a second straight day. “That’s what the American people are looking for and, you know, what we intended to do this year.”
The potential tax base is quite simply not deep enough to cover the difference. California is even now demonstrating the ultimate danger of depending on the rich for tax revenue, rather than controlling expenses.
There are, therefore, really only two possibilities:
a) the world will finance America by purchasing an extra trillion bucks of Treasuries every year for who knows how long. Some fat chance there, especially at nearly zero interest. With such an excess of supply over demand for the things the price will plummet — driving US domestic interest rates through the roof and utterly collapsing the economy. OR
b) inflation runs rampant, the world value of the dollar collapses, international trade disintegrates, and the world geo-political situation becomes completely unglued. Imagine China unable to export … for want of a market.
Oh, and just to keep it jolly, we haven’t even talked about the looming failure of Medicare and the impossible obligations of Social Security.
Political attempts to “save” the economy are nearly certain to make our problems worse by some orders of magnitude.
Thanks. An extremely good assessment.
I thought he was elected to bring change. and Hope. It’s like reading the anti-leadership sections of Maxwell, “Here’s how to do it all wrong; once a sense of urgency has been established, keep reminding everyone things will just get worse anyway … this will lead to a deeper spiraling of the problem.”
The US is rapidly becoming Brazil.
Wrong Brazil, Jeff. Today’s Brazil runs a generally balanced federal budget and has a solid balance-of-trade surplus. They have achieved energy independence via the Tupi oil field and only a third of their decent agricultural land has been developed.
There are no ‘sub-prime’ mortgages because most real estate is purchased in four installments — 25% and three payments at 30, 60, and 90 days. I could go on, but let’s leave it that in a lot of ways Brazil is now in significantly better condition than the I.O.U.S.A.
I stand corrected…I lived in Brazil in the 1980s, and it was, government-wise, much like we have in Washington today. I’m delighted they’ve gotten their house in order, even as we are setting fire to ours.
And the current Administration in Brazil is socialistic!
“That’s what the American people are looking for and, you know, what we intended to do this year.â€
Yea! That’s right! Give the masses what they ask for to keep getting elected. Promise them the world! Deliver it.
Then reality will set in.