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  • Obama's Debt Gamble


    The Washington Post’s Robert Samuelson writes:

    From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that’s atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.

    But wait: Even these totals may be understated. By various estimates, Obama’s health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.

    At worst, the burgeoning debt could trigger a future financial crisis. The danger is that “we won’t be able to sell [Treasury debt] at reasonable interest rates,” says economist Rudy Penner, head of the CBO from 1983 to 1987. In today’s anxious climate, this hasn’t happened. American and foreign investors have favored “safe” U.S. Treasurys. But a glut of bonds, fears of inflation — or something else — might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.

    The Obama budgets flirt with deferred distress, though we can’t know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal’s timing and nature are unpredictable.

    Posted in Ongoing Priorities [slideshow_deploy]

    5 Responses to Obama's Debt Gamble

    1. Bill, Kansas says:


    2. MAS1916 - Denver, CO says:

      Even the Chosen One admitted last week that the Chinese won't be willing to buy our debt in the future. The only problem is that they aren't too crazy about buying it right now. Even the Chinese understand that investing in something that Obama has control over is a losing proposition.

      Inflation will be the inevitable result. Obama has taken the recession and manufactured something far worse.

    3. Eugene Hoffman, Hous says:

      It seems that our Senators and Congressman, many of whom cannot calculate the taxes they owe, are using the formula of a constant velocity of transactions: does this sound familiar? It is the same formula that the derivative market used to justify the mess we are currently in: how can these "intellectuals" do this again to the American people? They are worse than River Boat Gamblers as they keep prostituting themselves to lobbyists and influence brokers. Is this change? Or is it the same kind of nonsense and corruption that has been going on sense the beginning of time? The people's voice is not being heard: and I fear that we are headed down the path of pure collectivism, which has historically signaled the demise of freedom of speech, self defense, and property ownership for the common citizen of any Country, or Nation.

    4. Pingback: » Financial News Update - 05/18/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

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