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the end of America
mlincoln
Member Posts: 5,039 ✭✭✭
From Reason
Beg, Borrow, or Steal
Why the bailout is a terrible idea
Steve Chapman | September 29, 2008
Sometimes bipartisanship is grounds for celebration, but more often it is cause for tears. Last week, congressional leaders from both parties went into a room to hammer out a plan that would put taxpayers on the hook for $700 billion. But they assert that the investment is essential to the health of the economy. And they insist that if we make this investment, we'll get all or most of it back.
This promise would be more believable if the federal government had a long record of using tax dollars responsibly. In fact, it's the equivalent of the guy who raids his kid's piggy bank to feed the slots. The most notable impulse of our leaders is spending money the Treasury doesn't have, piling up bills that future Americans will have to cover.
How do our leaders intend to pay for this massive new outlay? Not by raising taxes. Not by cutting spending in other parts of the budget. No, they will borrow the funds. The Chinese and other foreign investors will lend us money so we can keep the economy humming, which will allow us to make the payments on the money we already owe them.
Unfortunately, this deceptively pleasant process can go on only so long. Today the federal government wants to bail out an industry that can't meet its obligations. But it increases the chance that the next time, it will be the federal government that teeters on the brink of financial doom.
The $700 billion comes on top of $85 billion it is lending to save the insurance company AIG. It's in addition to the $200 billion it put up for mortgage giants Fannie Mae and Freddie Mac. There may be more on the way.
Add it all up and you find that our government has suddenly run up a trillion dollars in new liabilities. That sounds like a lot-unless you compare it with Washington's other outstanding commitments. Currently, the national debt stands at roughly $10 trillion, which is about three-quarters as large as our entire annual gross domestic product. But The Concord Coalition, a Washington-based fiscal watchdog group, says explicit and implicit obligations amount to $53 trillion-"almost as much as today's net worth of all household assets."
Hear that? Everything you own is already spoken for.
With each year, government spending rises, and the budget deficit gets bigger. As the baby boom generation retires, the gap will grow. Given current trends, federal outlays stand to double between now and 2050, while revenues remain roughly stable.
By then, two programs-Medicare and Medicaid-will cost as much as the entire federal budget does today. Which means that, essentially, we'll be financing two federal governments. If you dislike carrying a defensive end on your back, wait till his twin climbs aboard.
Even the government admits this can't go on forever. A report from the Treasury Department says that without big increases in revenue, "Medicare, Medicaid and Social Security spending and the related deficit financing costs will far exceed the government's ability to pay."
When you spend more than you bring in, you have to borrow to cover the difference. In the next three decades, the government's official debt is on track to triple. But at some point, the Treasury predicts, "the world's financial markets would likely cease lending to the United States."
Then what? David Henderson, a research fellow at Stanford's Hoover Institution and editor of The Concise Encyclopedia of Economics, ticks off the options: We could close the budget gap by drastically cutting spending or raising taxes. The Federal Reserve could print a lot of money, reducing the real value of the debt and making it easier to pay off. Or the government could default-in short, declare bankruptcy.
It may sound absurd to think the United States government would ever walk away from its debts. But if we are not willing to make painful sacrifices now, why would we be willing to make excruciating ones then? Inflation, says Henderson, is also unappealing because it would cause such pain here at home. Default would be more attractive to some Americans because we not only would escape our debt but also "would be screwing foreigners."
Once they have rescued the financial sector, maybe Henry Paulson and Ben Bernanke can answer the question that will eventually follow from this and other commitments: Who will rescue the federal government?
COPYRIGHT 2008 CREATORS SYNDICATE, INC.
Beg, Borrow, or Steal
Why the bailout is a terrible idea
Steve Chapman | September 29, 2008
Sometimes bipartisanship is grounds for celebration, but more often it is cause for tears. Last week, congressional leaders from both parties went into a room to hammer out a plan that would put taxpayers on the hook for $700 billion. But they assert that the investment is essential to the health of the economy. And they insist that if we make this investment, we'll get all or most of it back.
This promise would be more believable if the federal government had a long record of using tax dollars responsibly. In fact, it's the equivalent of the guy who raids his kid's piggy bank to feed the slots. The most notable impulse of our leaders is spending money the Treasury doesn't have, piling up bills that future Americans will have to cover.
How do our leaders intend to pay for this massive new outlay? Not by raising taxes. Not by cutting spending in other parts of the budget. No, they will borrow the funds. The Chinese and other foreign investors will lend us money so we can keep the economy humming, which will allow us to make the payments on the money we already owe them.
Unfortunately, this deceptively pleasant process can go on only so long. Today the federal government wants to bail out an industry that can't meet its obligations. But it increases the chance that the next time, it will be the federal government that teeters on the brink of financial doom.
The $700 billion comes on top of $85 billion it is lending to save the insurance company AIG. It's in addition to the $200 billion it put up for mortgage giants Fannie Mae and Freddie Mac. There may be more on the way.
Add it all up and you find that our government has suddenly run up a trillion dollars in new liabilities. That sounds like a lot-unless you compare it with Washington's other outstanding commitments. Currently, the national debt stands at roughly $10 trillion, which is about three-quarters as large as our entire annual gross domestic product. But The Concord Coalition, a Washington-based fiscal watchdog group, says explicit and implicit obligations amount to $53 trillion-"almost as much as today's net worth of all household assets."
Hear that? Everything you own is already spoken for.
With each year, government spending rises, and the budget deficit gets bigger. As the baby boom generation retires, the gap will grow. Given current trends, federal outlays stand to double between now and 2050, while revenues remain roughly stable.
By then, two programs-Medicare and Medicaid-will cost as much as the entire federal budget does today. Which means that, essentially, we'll be financing two federal governments. If you dislike carrying a defensive end on your back, wait till his twin climbs aboard.
Even the government admits this can't go on forever. A report from the Treasury Department says that without big increases in revenue, "Medicare, Medicaid and Social Security spending and the related deficit financing costs will far exceed the government's ability to pay."
When you spend more than you bring in, you have to borrow to cover the difference. In the next three decades, the government's official debt is on track to triple. But at some point, the Treasury predicts, "the world's financial markets would likely cease lending to the United States."
Then what? David Henderson, a research fellow at Stanford's Hoover Institution and editor of The Concise Encyclopedia of Economics, ticks off the options: We could close the budget gap by drastically cutting spending or raising taxes. The Federal Reserve could print a lot of money, reducing the real value of the debt and making it easier to pay off. Or the government could default-in short, declare bankruptcy.
It may sound absurd to think the United States government would ever walk away from its debts. But if we are not willing to make painful sacrifices now, why would we be willing to make excruciating ones then? Inflation, says Henderson, is also unappealing because it would cause such pain here at home. Default would be more attractive to some Americans because we not only would escape our debt but also "would be screwing foreigners."
Once they have rescued the financial sector, maybe Henry Paulson and Ben Bernanke can answer the question that will eventually follow from this and other commitments: Who will rescue the federal government?
COPYRIGHT 2008 CREATORS SYNDICATE, INC.
Comments
End all entitlements. If you are an able-bodied person, go get a job.
Period.
This government WASTES so much money, they should all be incarcerated.
D.
I just don't get the entitlement mentality that folks think the government has a BLANK check and can write it for any amount they chose for any reason, (good or bad).........
We are sliding into socialism inch by inch, soon nobody will own anything, the government will own it all and tell who lives where and who works where and who has money and who doesn't......
I don't agree with everything Glenn Beck says but I do agree with his statement, "there are two things you can't screw around with..... the force of nature and true capitalism". They both will weed out the weak and change the landscape from time to time but you ain't going to stop either one.
You are witnessing 'true capitalism'.
Free Enterprise, now...that is something special ..and lost in this country lo these many years ago.
I am sure that the events of recent weeks will not convince many folks to lay by a stock of food and supplies...after all ..the Government is invincible, and our top businessmen are all geniuses.
After all..look at how they have fleeced the American people out of trillions of dollars...and now they get to DOUBLE THAT AMOUNT...BY the government sticking a gun in YOUR ribs and TAKING an equal amount from you...
Do you suppose folks will get their azes out and do something productive...like learning long range shooting, gathering a bit of food, buying an axe and stove ..or just sit around looking at their 401's and praying for a market bounce ?
The States, Counties, Cities have papered millions of their nice Democrat employees with astoundingly large unfunded retirement benefits.
As to the current situation, a bunch of east coast banks got clobbered today, like Soverign, and State Street.
But.....But.....But Highball, the government guarentees bank deposits! We've nothing to worry about, the government told us so!
Was a fella right on these forums the other day saying the reason WaMu failed is because people withdrew their money. He never bothered to mention the bad loans they made, it was people withdrawing their money that caused the failure. Go figure.