The country was already broke when it was handed to him. He’s playing chess while everyone else is playing checkers. It’s a long term plan for a long term mess. Previous administrations have literally stuck their head in the sand when confronting real issues such as health care reform, the war costs, and entitlement reform. At least he has the guts to get out in front of it. If the naysayers have a better plan besides tax cuts, speak up. Being the party of no is not a winner anymore. The American people expect and deserve better.
The American people are NOT thinking/worrying about how much the deficit will be in ten years, they cannot put their minds around trillions, billions or multimillions. Plus NO ONE can know for sure what the deficit will be. Americans are more concerned about what’s going to happen the next day, next week, and when their 401k will come back. So the Repubs should stop lying, and saying what the American people are concerned about and start working on passing the budget.
Saving a bunch of banks - absolutely necessary. Providing health care for all Americans - optional. Ending the hostage situation with foreign oil producers - optional. Providing kids with an education that makes them productive and competitive - optional. Now that the corporate handouts are winding down, it’s not surprising that the recipients’ bought and paid for polticians would start wringing their hands over deficits.
If the government is going broke, it’s largely doing so in an effort to save a private sector that was on the verge of destroying itself at the hands of greedy, incompetent executives who were systematically looting their companies. I hope our collective historical memory extends back at least as far as last September.
I guess ill go point by point:
paragraph 1: I will agree with you about what previous administrations have done, and they are terrible with obviously huge consequences . Tax cuts aren't the way out of this, but it's not as though they should be looked at as evil. The dollar is a function of demand, more dollars in the hands of the people gives them more demand. Though, they don't always look after their own best interest.
2: Im sorry, but im VERY worried about what the deficit will be in 10 years, and i can put my mind around 10 trillion. It's a very large number and only looks to get larger. The problem with all this is that inflation is going to hit and hit hard. Inflation will do more to destroy wealth of the lower class than most understand. Add on top of that the fact that our children will still be paying on this debt, and that's insanity. Our parents were the most selfish generation that the world has seen. And you're right, we can't know what teh deficiet will be, but there are rational forecasts and to not worry about it is to ignore the elephant in the room.
And all of this is MEANINGLESS if China stops buying our debt, when and if that should happen we're fucked! They have already warned us about debasing our dollar.
3: I really think that all the options here should be mandatory and i think most agree. Education should be free through college, damnit! Don't forget what corporate hand outs went where, why do you think the administration is so red faced over the bonuses? Most of congress is just as bad as Bush was, just in their own respects. That goes for Democrat and Republican.
4. If the government goes broke, we go broke. We are the government. We are the people. If the USA defaults on debt this world goes to shit for a decade. We can't afford for that to happen, and we owe it to the world to see that no institutions are ever too large to fail again. They did that back in the 30's in some ways, but it apparently it only takes 60 some odd years to destroy the protections put in place by the people(The Glass Steagel Act).
1) It depends on where the tax cuts go, though. The problem is that when the government cuts taxes it's usually for the rich, very rarely does the bottom 98% see any of the tax cuts. It's a holdover from Reaganomics and the ridiculous "trickle down effect" that never works. The idea is supposed to be by cutting taxes for the rich they have more money so they create businesses which in turn creates work and thus wealth for the middle and lower classes. As we've learned all too well in recent years this doesn't work because the rich don't invest their tax cuts in businesses. They invest it in foreign-made cars, diamond-encrusted clothing, and gold-plated toilets.
2) It all depends on where we put the money that we're running up a deficit with. If it's spent in the right places we can use the deficit to strengthen the country in areas of need allowing us to cut back a few years down the road. That's how the New Deal worked, FDR ran a huge deficit but that deficit strengthen our infrastructure, boosted the general education level, and created thousands of new jobs. Once that was done he scaled back the spending to a more reasonable level and things continued to improve because we made an investment that paid for itself eventually. The real danger is that we run a huge deficit and put the money in the wrong places where it won't benefit us in the longer term - like Iraq, Afghanistan, the War on Drugs, and over a trillion dollars in corporate bailouts. Once we can finally pull out of Iraq that will put an ENORMOUS dent in deficit in and of itself. A big part of the sticker shock of Obama's budget is that he was kind enough to include war spending in the budget, something the Bush administration never did. As long as he sticks to his plan of getting out of Iraq within his first term that will cut hundreds of billions off of our deficit in and of itself. Many economists estimate that if he follows up on his promise to go through the military budget line-for-line and cut out wasteful spending on cold war-era weapons projects we could save another $100+ billion from that. If his plans for universal healthcare goes through it could save use tens of billions more while at the same time improving GDP and productivity by reducing the strain on businesses, small and large, who currently foot most of the bill for health care. Modernizing our medical records and painfully outdated energy distribution will save billions more. Promises to perform some woefully overdue maintenance on the budget as a whole will cut back further by getting rid of wasteful items that have flown under the radar for decades. There are other suggestions starting to fly around that will help further. A number of economists have come out of the woodwork lately suggesting the decriminalization, and some even legalization and taxation, of illegal drugs. Decriminalization would free up the approximately $44 billion a year spent by federal, state, and local governments fighting the war on drugs every year. The same Economists estimate that fully legalizing and taxing drugs could produce $33+ billion in annual tax revenue. Do both and you're talking about a $77 billion overal change.
As I said, it depends what is done with it. We are in a period of enormous crisis, Obama has undertaken the most difficult presidency since Abraham Lincoln took control of a fractured post-Civil War union. As long as this period of deficit is used wisely then it can be reformed down the road and, as Obama said, we can turn this crisis to opportunity. Drastic times call for drastic measures and drastic measures are what we're seeing. We just need to hope it works, sometimes massive spending and deficit is the only way to fix a broken system. To put it in simpler terms, think of it as taking out a loan to by a more fuel efficient car - you're taking on more debt now in the hopes that your savings on fuel down the road will make up for it.
3) I'll take free universal healthcare first. Though a universal public college education would be nice. The important thing is to FIX our education system first, then we'll worry about what a college education costs. Right now we can barely provide a high school education to all our children, the quality of public education is deplorable. Lets fix that first.
4) The Glass-Steagel Act will eventually overtake the whole Lewinski scandal as Bill Clinton's biggest misstep. Repealing that was a huge mistake and had more to do with our current mess than democrats would like to admit. I've been following the whole gathering on Capitol Hill as much as possible to me and it seems Tim Geithner has the right idea, I just hope we don't end up with Republicans screaming socialism again and blocking what he's suggested. Basically it amounts to MASSIVE reform of our financial regulators akin to what we had back in the 30's. A lot more oversite by the government and the ability of regulators to step in and essentially take over monster banking institutions temporarily to prevent what we have going on right now. Most of the ideas he has are very good, IMO, but actually getting it done is going to take some major doing with the Party Of No currently doing their best to block any and all progress. What he's suggesting isn't going to go over well with them at all. We'll have to wait and see what happens.
I have some fundamental issues with the current economic sentiment in Washington. Many leaders in Washington, including Obama, are strongly motivated to take action to help the economy. This motivation, however, makes their actions clumsy. Subtle, but important, effects go unnoticed and unquestioned with this sledge hammer approach. I'll describe a couple which come up in this post.
One very important point being ignored is inflation. The government does not have capital to draw from and foreign banks are growing more and more wary about lending us money. Therefore a significant source of money comes from bills printed by the Federal Reserve. This printing of money has no effect on any underlying value within the country. When you have more bills and value remains the same, then each of those bills will be worth less than before. For example, if the money supply was doubled then each bill must be worth half as much in order to represent the same total value as before. While this happens to both our bills and the governments bills, the government is unaffected since they are compensated for a decrease in value of each bill by having more of them. The net effect is a very subtle tax. Your bills are decreased in value and all of that value is given to the recipient of loans from the Federal Reserve. Therefore, whenever the government or Federal Reserve pumps money into the economy they are doing so via a very subtle tax on the average Joe. People may not be thinking about these trillions of dollars, but they should be. Or else when their 401k does bounce back they will find that it can't buy anything.
My other contention is the idea that we must save these banks from failure. We would actually be better off in the long run if they did fail. When a bank gets to the brink of failure it has done so through a process of destroying wealth. Whether through mismanaging risk or over spending, the bank has managed to take a certain amount of capital and turn it into nothing (or maybe even less than nothing when you consider their debt). When we artificially save a bank from collapse we are promoting this destruction of wealth. However, if we allowed the banks to fail then other banks (which are still around because they have been capable of increasing wealth) will be able to grow and take on the failed bank's customers and assets. This process transfers control of that aspect of the economy from an organization that destroys wealth to one that creates it. Saving banks isn't just not necessary, it has a long term negative effect on the economy.
While government spending in key areas can serve to strengthen our economic foundation, considering our current overextended state it is a process which should be accompanied by equal or greater cuts elsewhere. That's a process which will require quite a bit of knowledge and finesse. The reaction and hype in the media and in Washington make me feel as if there is not much of either.
On your first point, inflation is definitely a major concern. Unfortunately it's a risk we have to take. The other option is to leave things as they are which is not an option at all. Something had to be done and in order to take action capital needed to be created. Another unfortunate side-effect of the bush administration's mismanagement of our economy.
The second point is something I absolutely agree with, I actually wrote a blog saying the same thing.
As I said in that blog, we keep hearing all these doomsday stories about how the entire world economy will collapse if we allow these bloated banks to fail yet no one seems to be able to say why. It's seems to be a situation of "we don't know why it is that way, it just is, trust us..." Hey where have I heard that type of reasoning before? Hmmm.....