Obama--Here a Trillion, There a Trillion

Okay, the White House has quietly conceded that our national debt will rise by NINE trillion dollars over the next ten years—instead of the 7.1 trillion it had projected in January. This is in line with what the Congressional Budget Office has been saying.
That’s because fewer people are working and paying taxes (the White House predicted that unemployment would not go above 8%) and fewer businesses are making big and taxable profits. So there’s less coming in and a whole lot going out.
This can be a problem for anybody’s budget. We all have months like that—but this is years and years into the future. Now, we are told, our shortfall will be 27% percent higher than we thought. That’s like being told by the mechanic that fixing your car will cost an additional 27% more than the original estimate.
We’ve all gotten off the phone after a conversation like that and thought, Omigod. Where is the money going to come from? We can skip the mortgage this month. Or a car payment. We can eat only beans and rice for a few weeks. Maybe we can apply for another credit card?
Our government is backed up into the same kind of hole. China—which has been loaning us the money to live on for a decade—is all of a sudden scared of how much American debt it is holding. The Chinese are dumping American treasuries at an unprecedented rate.
If foreigners stop buying treasury bonds at the present rate of interest, we are going to have to raise the interest rates. That will reset all interest rates—housing, autos, credit cards, college, you name it. You want to kill a housing boom fast? Raise payments (interest rates) a couple hundred a month.
Otherwise we can raise taxes. Probably quite a bit. That cuts back consumer spending and corporate hiring. That doesn’t do a lot to encourage any economic rebound. These are the alternatives if we wish to keep spending at our present rate.
Borrow more, tax more and/or jack up the interest rate. None of the three is going to benefit the American economy in the long run. That leaves just one other option.
We can cut spending. I can hear the Republican side of the aisle cheering madly. Okay, wonderful idea. Just where and what are you going to cut. We’ve been paring back the federal side of government expenditures since the 1970s.
We’ve dumped a whole lot of federal mandates on the state and city budgets. We tell them what programs they MUST put in place—unless they want to lose even more federal dollars—and we tell them to pay for it themselves.
(This is done under a new economic theory called “Neo-liberalism”. Under it, states and cities supposedly have much more freedom of action because they are no longer dependent on federal dollars. You may want to ask how being ever more broke increases your freedom of action. Not a bad question.
(The theory is a reversion to 19th Century liberalism. [In this country, Cleveland Democrats.] Under Keynesian theory—which replaced classic liberalism--government controlled and directed society by mandating programs and paying for them. Under old fashioned liberalism, government made no attempt to direct society and it paid for little more than national defense.
(The new liberalism makes a kind of perverted sense if you understand its intent. Reagan, a classic neo-liberal, spelled it out. He has often been accused of trying to destroy the federal government by slicing off its revenue. In other words, it will eventually have to stop functioning because it can no longer afford to function. The same thing began to be done to the states and cities starting in the 1970s—a decade before Reagan.
(George W. Bush was a dyed-in-the-wool neo-liberal. He essentially out-Reaganed Reagan. His policies—and those of every president since Nixon—may finally be coming home to roost. The federal government may at last be forced to cease many of its functions.
(If the Chinese cut off our credit and we cannot afford to raise interest rates and taxes enough to compensate, Neo-liberalism—the ultimate in “laissez faire” government—will be everywhere triumphant.)
But what will the federal government be forced to cut? Some national defense items—we may no longer be able to go play war in far off climes. (That will cost us. Try oil, for instance.) Big budget items like Social Security will have to be cut back—classic liberals have wanted to get rid of that program since 1935.
Medicaid and Medicare will have to be slashed if not eliminated. (This would be an absolute Neo-liberal wet dream; forgive the crassness. I cannot come up with a better analogy.) Educational programs that are still being funded by Washington will have to go. Another cause for joy in the classic liberal camp! Air pollution abatement, clean water, national parks, medical research, funding for the arts, and other fripperies like climate change studies will have to be cut way back.
We’ll be left with a government that doesn’t do much more than keep a naval presence in the hemisphere, maintain roads needed for business, and service the interest on our HUGE national debt. Don’t be shocked. Lots of Third World countries live like that.
That will start to knock back some of the nine trillion in debt we owe. It will be the final triumph of Reaganomics—and Bushenomics while we’re at it.
Everybody will blame Obama and his stimulus package. They’ll look back to Bush, Clinton and Reagan as the good old days. But it’s the wicked, Keynesian Obama who will take the hit. I do feel sorry for him. I wrack my brain to think of what I might have done differently had someone stuck me with the presidency a year ago.
I honestly don’t have a cleverer solution. His may not have been good—but THERE WAS NO GOOD SOLUTION. He landed up to his neck in a hole other people had dug. He honestly did his best to try to crawl out of it—and to drag you and me up with him.
Would McClain have done better? He would have had the same teaspoon with which to try to empty out the ocean. I don’t hear him suggesting any miracles today—he didn’t suggest any a year ago.
You can, at worst, accuse Obama of having made a bad situation a bit worse. But he, sure as the world spins, didn’t create what’s likely to come.