As we’re now learning, the current federal accounts deficit for this year will exceed $1.2 trillion, which is over 8% of GDP. This beats the previous record of 6% set during the 1982 recession. And the prospects for fiscal discipline in the new Congress are not good. First on the legislative agenda is a ’stimulus’ package that will likely add another trillion or so to the ledger. As with the $700 billion TARP fund passed last fall, we’re now being urged to rush through this new package because we’re ‘running out of time’ or some such twaddle. But sticker shock is setting in. From McClatchy:
The forecast Wednesday of a jaw-dropping $1.2 trillion one-year federal budget deficit will make it harder for President-elect Barack Obama to win broad support for a massive stimulus package that would add even more to the red ink.
With his party controlling both the House of Representatives and the Senate, Obama’s still likely to get the OK for spending and tax cuts that cost $1 trillion or more over two years and are designed to jump-start the economy and create or save 3 million jobs.
However, while many economists, business groups and politicians agree on the need for something dramatic, Obama now concedes that he’ll have to wait until February to get a bill to sign. He’ll probably find conservative “blue dog” Democrats as well as Republicans balking at the idea of borrowing another $1 trillion on top of this new annual deficit.
They could deny Obama the kind of broad, bipartisan approval that he hopes will signal not only that he’s changed the political culture of a divided Washington but also that he’s put forward a plan that’s widely popular. Such approval is crucial as he moves to rebuild trust in the government and the economy.
He plans to speak more about the need to rebuild confidence in a speech on the economy Thursday.
Yet even before he can point to a law meant to boost the economy or to post-stimulus efforts to rein in budget deficits, he has to deal with the fallout of the Congressional Budget Office’s forecast that the current year’s deficit will jump from last year’s $455 billion to a record $1.2 trillion.
“There’s a sticker shock problem,” said Steven Schier, a political scientist at Carleton College in Minnesota and the author of a book on budget politics. “This is a new problem for Obama: How far out there are people willing to go?”
How far indeed? One of the problems is that nobody has the faintest idea what the money will be spend on. Chances are that the ’stimulus’ will degenerate into the biggest pork distribution the world has ever seen. Spending specifics are hard to come by, although there are rumors that subsidies to Planned Parenthood will be increasing – doubtless an enterprise vital to the economy.
And Hope ‘n Change declared today that only government can get us out of the present jam. From Breitbart:
Speaking a day after the release of a stunning new deficit estimate—that the federal red ink will reach an unprecedented $1.2 trillion this year, nearly three times last year’s record—Obama acknowledged some sympathy with those who “might be skeptical” of the stimulus. Vast sums already have been spent or committed by Washington in an attempt—largely unsuccessful so far—to get credit, the lifeblood of the American economy, flowing freely once again.
Such statements are meant to appeal to both parties’ budget hawks, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.
To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going. A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.
Obama made broader arguments, too, saying that the private sector cannot do what is needed now.
“At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe,” he said.
Obama also promised action to address the economy’s ills beyond the package, such as tackling a potential wave of home foreclosures, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the “Wall Street wrongdoers” who engage in risky investing.
This entire line of argument is sheer nonsense. First, it wasn’t the private sector that got us into this mess – it was government malfeasance. Second, we’re going to print a whole lot of money and give it to the same miscreants who got us into this – and there’s no sign that their judgment has improved. Third, there’s absolutely no evidence that government spending fixes recessions. In fact, the evidence is quite the opposite – recessions typically last 12-24 months and then matters turn around. Like the New Deal, wholesale governmental intervention will make matters worse, not better.
But the most outrageous part of this entire scam is the blatant hypocrisy: last fall, we were told by our betters that promiscuous debt got us into the present mess. And now we’re being told that promiscuous debt will get us out of it.
How stupid do these people think we are? Don’t answer that.
