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The Spectacle Blog
The
Washington Post reports on the fiscal bind into which we
have been led by the neo-Keynesian “stimulus” approach to the
recession:
The nation can’t sustain trillion-dollar deficits without driving up the debt owed to private investors to dangerous levels that could undermine the nation’s global economic dominance. That debt now stands at nearly $6 trillion.
A tax hike to pay for all this “stimulus” would certainly make matters much worse, yet the bond market — a subject I referenced this morning — must calculate the likelihood of repayment, and it’s not just “global economic dominance” that is at stake, but rather the fundamental integrity of the federal government’s “good faith and credit.”
The Post article goes on to cite the unfunded liabilities of Medicare and Social Security, and Jennifer Rubin comments:
The president and his spinners declared this all to be a “long term” problem that had to take a back seat to the short term “solution” for the recession. But little they have done in the short term will improve the economy, which by their own calculations would have begun to bounce back on its own by the end of 2009.
The “long term” problem is now. The first act comes with the next major auction of Treasury debt. Are we going to start printing dollars ourselves to buy up Treasury paper? Raise the interest rate on bonds to keep Chinese and other investors in the game?
Rubin hits the nail on the head. The fiscal fantasies of Hope are about to slam head-on into the economic realities of the bond market. Economic reality is an unmovable object, and liberals are about to discover that Hope is not an irresistible force.
Or, in fewer words: It Won’t Work.
(Cross-posted at The Other McCain.)
View all comments (21) | Leave a comment
More Blog Posts by Robert Stacy McCain
http://spectator.org/blog/2009/02/15/the-fiscal-trap-of-hope
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Syble Green | 2.15.09 @ 11:55AM
visit www.black-and-right.com for all the stuff that YouTube refuses to allow on.
Thanks
Alan Brooks| 2.15.09 @ 12:43PM
they don't necessarily want capitalism to be resuscitated, they want-- probably-- a 3rd way approach.
Mary| 2.15.09 @ 1:06PM
RSM, here's to your health and continued good energy. Quit smoking by the way! The first few months will only feel like an eternity! Yes, I know it's none of my business. So what?
Head's Up.
When the economic crash happened in September I wrote over at Contentions that it would be better for us to endure a severe but short shock therapy than to prolong and exacerbate the inevitable.
I listen to Bob Brinker on weekends. He has a radio program called Money Talk. He seems to think we'll come back bigger and better than ever, but I've not really heard him explain how he thinks that's going to happen, though I may have missed that part.
I'd give what remains of my 401K to an honest politician, and I'm not joking. Money is nice, but I'll always be able to make more. I once had a guy -no hanky panky prospect involved here- offer to fly me to Florida to interview for a job with his company solely based on how I handled a telephone conversation with him and the "verbiage I used." I thanked him and declined because I could never leave my parents without their only daughter close by. I'm determined to keep and care for them at home, and to quit my job if I have to.
There's a good possibility I might lose my job in a few months. I'm single, so I don't have to really care about that. Might I make less money? Yes. Might I take some savings and return to school? Possibly. Could it represent the return of an opportunity that I spurned earlier on in my life? Without a doubt.
What's the point? Not to lose hope, that's the point.
Conservatism -that is an understanding of personal responsibility, repentance of shoddy behavior, inexcusable indolence in the face of superior work ethic and values bequeathed us by our fathers, the courage to call evil, evil, and good stewardship of resources- is not dead by any stretch of the imagination.
President Obama won and he has every right to try to implement what he thinks is his mandate. The Republicans have every right to fight against that so-called mandate. As James Antle pointed out, they won too.
If you remember in '94 when the Republicans took the reigns of power after so many years in the legislative wilderness, Rep. Gephardt handed the gavel to Newt and said "let the great debate begin." It revealed, despite natural partisanship and a sense of loss, the heart of the man. And I've liked him ever since.
I don't want to see any nonsense from the Republicans.
Glenn Beck put it plainly to Chairman Steele: why should we trust you? And Mr. Steele responded as he should have. The idea that the Republicans can avoid a mea culpa, mea culpa, mea massima culpa is a pipe dream. That this collapse is a bipartisan fiasco illustrating the incompetence of these last 30 years is immaterial. They, we, need to forthrightly take the responsibility of the part of this that is ours.
You know in all of this it's hard not to think back on Vietnam and the supposed final blow we dealt the USSR, and wonder if in pursuing that noble goal we didn't inadvertently deal ourselves a final blow as well.
It's easy to get caught up in love of Country in this way. Hamilton is the father of this instinct. Hamilton is also the father of setting us on the right economic course so that we didn't go the way of South America. If you're going to need people to lend you money, they need to be confident you can repay it. That your system's foundation is not one built on sand.
I live in an apartment complex that is peopled by immigrants from the various countries that once comprised the USSR. We are supporting most of them with our tax dollars -they are elderly- though they contributed very little to the dynamism of the Country. I don't mind so much because their kids and their kids' kids contribute now. Little Nikita rattles off English and Russian perfectly. I've picked up a bit of Russian myself. Most of them voted for McCain.
Republicans need not fear standing up for what they believe in, provided they understand how important honor is.
It's done me good to tune into Rush again. He's a true original.
J Kelley| 2.15.09 @ 1:33PM
We have a State run media. with the exception of talk radio. And there are indications from the left to shut that down. If the majority of people knew what is about to take place, they would rise up. But all they hear is the spin form the left. If we do nothing, the economy will recover by the end of this year. But that is not the plan of the left. they will use this downturn to take over the private sector. Some day soon the people will say, why did not someone tell us about this. What can we do?
Thomas| 2.15.09 @ 3:43PM
The problem with government intervention is that most people have no idea who they have elected to serve them in government. They are totally unable to understand politicians, because most people, by the time that they are in their twenties, have moved beyond the developmental age of politicians.
Think of a seven year old being left unsupervised in a store with his, or her, parent's charge card. What would most seven year olds do? Buy anything that catches their fancy. Why? Because they can. But who is stuck with the bill? Mom and Dad are. But, that's all right too, because the bill won't come due for a month, and that is a long time in the future for a seven year old. And that Ferrari is cool and all the girls will love it and it will make me so popular, so I'll just worry about it later. The Congressional kindergarten is open for business.
Now we expect our President to be a wise adult. He'll keep the little kids under control. But, not this time. This time we got the cool kid that everybody likes cause he is, well, like, ya know... COOL. And he is gonna help us spend Mom and Dad's money on cool things, like MagLev trains from Disneyland to Las Vegas and possibly saving useless mice in a swamp in California.
When you put a bunch of retarded dolts in charge of the country, just what did you expect?
Pingback| 2.15.09 @ 8:53PM
Instapundit » Blog Archive » THE FISCAL TRAP of hope. links to this page. Here’s an excerpt:
egoist| 2.15.09 @ 9:30PM
I don't doubt the horrors coming. But China's FM did indicate they'd buy our trash - yet it wasn't buy maybe a month ago they bought something like 8Ktons of gold.
Yes We Did| 2.15.09 @ 9:30PM
You racist hatemongers just don't get it, do you?
We won, you lost, and you'll never get another chance.
K T Cat | 2.15.09 @ 10:40PM
Because the Chinese Yuan is pegged to the dollar, they pretty much have to buy Treasuries. Once the Chinese decide that they don't want to match us mint printing run for mint printing run and finally remove their link to the dollar, then all bets are off.
Yes We Did| 2.15.09 @ 11:28PM
Yes We Did win and now we are going to screw all of you stupid Americans! Just watch us, suckers! Rahm
sean| 2.16.09 @ 12:10AM
If the Chinese decide they no longer want the Yuan peg our trade deficit with them will shrink and a larger percentage of private sector savings will be held domestically or by someone else - it really doesn't matter.
The dollars that are used to buy bonds come from federal government spending - we don't get them from China or anyon else. We have a fiat currency and the Treasury is the monopoly supplier of dollars. If stimulus leads to increased agregate demand rates will go up. If not they will stay low.
hamillton| 2.16.09 @ 5:04AM
Sean said: "If the Chinese decide they no longer want the Yuan peg our trade deficit with them will shrink and a larger percentage of private sector savings be held domestically "
Except that the private sector saving rate in the US is zero (or was it negative for 2008?). As Americans start to save (i.e. Q4), demand suffers and so does the economy. The rebalancing will hurt, but the government mismanagement has the real possibility of bankrupting the USA. Hope and Change is all we will have left. Hope I can find something to eat with the Change I have in my pocket.
Pingback| 2.16.09 @ 5:44AM
Citizen Paine Blog » Patrick Murphy parrots Obama talking points on stimulus links to this page. Here’s an excerpt:
J David| 2.16.09 @ 9:16AM
You over-rate how effective slamming into reality will be on the New Age visualizers, Mr McCain. After they run into immovable realities, and mind-bending catastrophe, world-wide, it will be decided, WORLD-WIDE, that to make the failed fixes work, everyone(every person, every state, every country)must be MADE to participate, and throw into one kitty. It is happening right now as write this...
Reagan's Ghost| 2.16.09 @ 9:20AM
I believe this was THE FUNDAMENTAL aim of a world wide communist revolution, was it not? It is conjectured that, ultimately, everyone must be forced to participate, to negate the contradictory effects of local economies and markets.
sean| 2.16.09 @ 7:08PM
hamillton - i said private sector savings not domestic private sector savings. if we continue to run trade deficits with countries with pegged or amanged currencies their surpluses have to be invested in dollar assets. if we dont our domestic savintgs rate goes up. its an accounting identity - the public sector (federal gov't) deficit is exactly equal to the private sector surplus. the money that buys govt bonds comes from govt spending. bond supply does not push rates up, increased agregate demand does.
Pingback| 2.17.09 @ 5:40AM
Morning Line - February 17, 2009 : Delmarva Dealings links to this page. Here’s an excerpt:
Deborah | 2.17.09 @ 6:43AM
My first thought about this coming from the Washington Post AFTER the bill has been passed was -- "Now they tell us!!" Where was the media DURING the brief discussion phase? MIA.
Pingback| 8.29.09 @ 8:09PM
Twitter Trackbacks for The American Spectator : AmSpecBlog : The Fiscal Trap of Hope links to this page. Here’s an excerpt: