President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”
What am I missing here? Isn’t this like an arsonist complaining that the local fire department isn’t doing a good job a fighting all the fires he is starting?
Do you think the mainstream media will call him on this or pant patiently at his feet to hear about the next piddling cuts some working group of his finds?
In the words of Leroy Jethro Gibbs, “Ya think, Obama?”
““It’s time for reform that’s built on transparency, accountability, and mutual responsibility, values fundamental to the new foundation we seek to build for our economy,†the president said.”
Still working on those strong arm tactics on banks, I wonder? Cabinet members, too? This transparency stuff is tuff.
I’m glad to have a president who recognizes the problem.
I’m not sure I understand his solution (actually I am sure that I don’t).
I guess that is the advantage of his Harvard education. Will we all get to go to Harvard some day?
I’m not sure that I find it comforting that Obama seems to know exactly what he is doing. I would rather be able to ascribe the destruction of the American economy to ignorance and naivete.
Just goes to show that you don’t have to be Jewish to have a heapin’ helpin’ of chutzpah.
Read the subtext here, folks: If Obama is intent on spending like a drunken sailor (with all apologies to drunken sailors), then the only conceivable answer is to raise taxes to stratospheric levels, no? Well, America, you voted for “change,” now you’re going to get it good and hard.
#4 May I suggest the following:
When we all get to Harvard,
What a day of rejoicing that will be!
When we all meet the marxists,
We’ll all sing the Internationale!
The last line needs work.
The logic is like follows: because Americans and businesses are not spending, there is less income going into the coffers. If they begin spending, the spead of the cycle of spending allows for money to be distributed more quickly.
And this is one of the central issues: getting money to be passed around rather than hoarded. Essentially, the government is taking the temporary role that businesses usually do.
Now – eventually, after 10 years or so, businesses may decide, once they have contracted so much, to begin investing. But why wait ten years for the business cycle to begin? Why not just get the cycle moving. A key part of the prosperity equation is the speed at which money changes hands.
So eventually, there will be more taxpayers because there are more people who have jobs. The cash that is being spent by the government will, at some point be returned. Except this time, people are employed, they have houses, and money to spend at all the small businesses around them because the government has invested.
At some point…hmmm…if that’s the case, why do I see CBO deficit projections “improving” to $600 billion in 2012 before plunging back to $1.2 trillion in 2019? Is not your Keynesian model built on the idea that supluses pay back the debt incurred during your “stimulus” periods?
As shown by the comments here, one’s first instinct is to laugh out loud at Barry’s sheer hypocrisy and disconnect from reality. The key, though, is to parse the words (yes, just like we had to with Clinton): we can’t keep spending like this and borrowing.
BUT: we can keep spending like this if we get the money not from borrowing, but by seizing much, much, much more of the property and earnings of Americans (or else). See how it works?
Ok – I get it – it’s sorta like when they cut taxes and businesses/people invest the money….only the government is better at it now than the businesses used to be. They will take it from those who are doing a bad job (by making money and hoarding – where do they hoard it anyway?) and spread it out. And the money will move around faster when the government spends it than when the people who had it before did.
But I don’t get the interest part – how does paying the Chinese interest on all this money increase the speed of it changing hands?
Don’t worry, we can easily deal with this by selling small portions of the country off to our creditors in return for a release of indebtedness. For example, China probably would be willing to buy Hawaii at the right price. Maybe you could throw in Alaska, Washington State and Oregon in as well. It could be like Hong Kong, they would recognize the present legal and economic system in those states for, say 50 years, before fully incorporating them into Greater China.
So, Obama is saying his policies are a failure, but only his policies will save us from the failure of his policies?
That … so … does not make any sense.
Jim the Puritan,
How about: we can charge Hawai’i for regain their independance and charge Puerto Rico to become the substitute 50th State. That way we get money from both and still have 50 States. (still have a few to go to get to Obama’s “I’ve been in all 57 states and still have about three to go” calculation.)
Our good Curmudgeon has anther fine essay on this subject. In particular, he has a graph which shows [i]graphically[/i] what Jeffersonian refers to – debt falling a bit in the next few years (after taking a huge jump) but then rising up, up, up.
#9 – well, to some extent the projections to 2019 are fairly speculative. We won’t know exactly what happens.
But the point is not to worship a balanced budget, but to ensure that people are working. By and large, worrying about a balanced budget doesn’t help with ensuring that people are participating in a commercial society. Since commerce is contracting right now, and will be for the forseeable future, government is essentially buying services on behalf of us – who aren’t buying much these days – so that people are given the incentive to make and sell and thus hire other people.
If they’re speculative, it would be easy to show us going into balance, no? But not even the Obama administration can make the assumptions that would require that given the huge draw the boomers will be making on the national treasury by that time. Obama’s short-term projections assume an 8.1% unemployment rate, already a pipe dream as the figure heads north of 9% and likely to 11%. Indeed, as I’ve pointed out, even the short-term promise of dropping unemployment due to the porkulus bill has fallen flat, as the rate has soared above what we were warned it would be absent the spending.
Capital investment will not occur on the scale needed until investors are sure Obama is done stomping around in the markets, stripping away property rights and directing capital to the most inefficient consumers of it. The sooner President Unicorn sits down, shuts up and does the job the Constitution sets out for him, the better off we’ll be.