Hillarysworld

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“We’re not going to save our way out of this recession. We’ve got to spend our way out of this recession.” – U.S. Majority Whip Jim Clyburn

Just days before Congressman Jim Clyburn had the “audacity” to admit what D.C. politicians were actually doing with our tax dollars, U.S. President Barack Obama had the cowardice to continue concealing government’s unprecedented generational larceny.

“It is critical that we rein in the budget deficits that we’ve been accumulating for far too long,” Obama said in unveiling his latest effort to distract American citizens from a looming fiscal Armageddon.

Of course, after proposing a so-called “budget freeze” in his State of the Union speech, Obama rolled out the “Mother of all Boondoggles” (for now, at least), a $3.8 trillion spending plan for the coming fiscal year that includes a record $1.6 trillion deficit (on top of the $1.4 trillion deficit government will run in the current fiscal year). By the end of this month, the Treasury now projects that the U.S. will hit its $12.4 trillion debt ceiling, coming on the heels of a vote last week in the Senate to raise the debt ceiling from $12.4 trillion to $14.294 trillion. And just this week, Moody’s warned that the nation’s Triple-A rating could be in jeopardy “if the current upward trend in government debt were to continue and become irreversible.”

“It would be a terrible mistake to borrow against our children’s future to pay our way today,” Obama said – but then he did just that, endorsing a spending plan that grows government by hundreds of billions of dollars when the nation can least afford it, and when the country’s first major entitlement bubble is about to burst.

According to a new CBO report, Social Security outlays will exceed revenues for the first time in 25 years in 2010 – and a wave of red ink is rapidly building up behind this immediate tipping point as the program will run permanent deficits beginning in 2016. Meanwhile a similar Medicaid implosion is on the horizon, and on top of these brewing disasters we have the hundreds of billions of dollars America must devote to interest payments on its mushrooming debt. (Emphasis added)

Yet amazingly, with the same sleight of hand that his so-called stimulus “created or saved” imaginary jobs (in non-existent Congressional districts), Obama now claims that federal deficits will begin to magically decline by 2012 – although even his rosiest numbers don’t envision annual deficits falling below $1 trillion until after 2020.

More . . .
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Monetary and fiscal policy are not easy to understand. They need to work in concert and the government, the Treasury and the Federal Reserve Bank have failed to make the policies work together.

Case in point is the huge delay in announcing the incentive of $5k per job created. It needed to come a lot sooner.  The Stimulus has gone to wasteful "terminal" spending rather than investment.  Cleaning park is luxury time spend and a terminal spend. Incentive for building new factory would have been a terrific choice. Subsidies for factory upgrade would have been terrific to see some 'rich money' spilling into the economy. Instead, the government squandered the money and got zero leverage from it.

A good fiscal policy acts as a leverage point to get the rich to plough in money into the economy. It gives guidance to the nation on which sector to invest in and where to create new jobs by giving small carrots early in the recession.  I was hopeful that ARRA would do that; disappointed that it has not.

The monetary policy has tried hard to supplement the fiscal policy.  But the monetary policy cannot incent the banking sector that is hugely burdened by the insurance sector that is now built into it.  The fact that insurance and banking are co-mingled is going to dog this country until they are split apart.

-- Edited by Sanders on Saturday 6th of February 2010 04:04:50 PM