As reported on by the Wall Street Journal,
President-elect Barack Obama on Tuesday emphasized his commitment to fiscal responsibility, promising that his team would strip the federal budget of all unnecessary spending to help offset large outlays expected for his planned stimulus package.
But Mr. Obama didn’t provide many specifics, and he gave little sense of how he would tackle entitlement programs like Medicare and Social Security. Few experts believe the budget deficit can be brought under control without trimming spending on these programs.
These words sound to me like the obligatory hat tip to the concept of fiscal discipline and budgetary restraint by the government. Except for a few years under the Clinton administration, the country has seen ever more massive deficit spending at every level of government, especially since the early 1980’s. John Q Public has not been bashful about borrowing every dime that he could as well, encouraged by government agencies and banks all too eager to make every citizen a homeowner regardless of his credit rating or ability to service the debt taken on. For good measure, the purveyors of credit cards and second mortgages did their best to extend credit lines in massive amounts so that John Q Public could live the life style he was entitled to.
Many good minds have argued with persuasive logic and statistics that the over extension of credit has in no small part contributed to the financial debacle that is now impoverishing us all as a nation. Regardless of whether or not one decided to participate in the credit bubble, we are now all paying a very dear price. Our children and their children will pay a heavy price as well since we have already spent their future, leaving them little but IOU’s in return.
Some of the many obstacles blocking President-elect Obama’s road to fiscal discipline include the following:
– calls for a $700 billion stimulus package (will probably wind up being more)
-the coming bailout of GM and Ford which will be open ended
-the country’s inability to deal with or even discuss the unfunded liabilities of $90 trillion for medicare and social security (the country’s entire wealth is estimated at $56 trillion but dwindling rapidly)
-a bailout of various state and local governments; starting tab at least $100 billion
– continued bailout of our insolvent banking system; final cost indeterminable
-upcoming bailout of the insurance industry will make the $150 billion “investment” in AIG look small
-calls for energy independence have virtually disappeared, coinciding with the drop in oil prices. To truly implement energy independence will cost trillions today; to ignore the situation risks our future economic fate
– reducing unnecessary government spending is seriously doubtful; reducing any government program means taking on the entrenched political and economic interests of the recipients of such spending.
The above list of bailout needs/new programs will no doubt grow considerably larger and this list does not include the $7 trillion (to date) in guarantees and bailouts by the Fed and Treasury. I would expect next years budget deficit to be approaching the $3 trillion dollar range and it will be exceptional to observe how it will be funded. “Quantitative easing” by the Fed will grow by ever larger amounts.
My best wishes to the President-elect on his commitment to fiscal responsibility but I am not fooled by such talk. Since many observers have compared Mr Obama to President Lincoln, I am reminded of one of Lincoln’s more memorable lines; “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”