They’ve just made things worse:
…Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.
Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office’s (CBO) analysis of the president’s budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms…
…Mr. Obama and his advisers say they understand these concerns, but the administration’s policy choices are the equivalent of steering the economy toward an iceberg. Perhaps the most vivid example of sending the wrong message to international capital markets are the health-care reform bills—one that passed the House earlier this month and another under consideration in the Senate. Whatever their good intentions, they have too many flaws to be defensible.
First and foremost, neither bends the health-cost curve downward. The CBO found that the House bill fails to reduce the pace of health-care spending growth. An audit of the bill by Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, found that the pace of national health-care spending will increase by 2.1% over 10 years, or by about $750 billion. Senate Majority Leader Harry Reid’s bill grows just as fast as the House version. In this way, the bills betray the basic promise of health-care reform: providing quality care at lower cost.
And where are we, right now? Well, our policy makers are desperately trying to stave off the inevitable:
Ambrose Evans-Pritchard reports Core deflation in the US continues to gather pace
Core inflation for factory goods in the US fell to minus 0.6pc in October from a year earlier, edging the country closer towards Japanese-style deflation despite massive monetary stimulus.
Janet Yellen, the head of the San Francisco Fed, said emergency measures had prevented the US economy from sliding into a “black hole of deflation”, insisting that it is still far too early to talk of tightening policy.
We’re in a depression and the government is desperately trying to prevent the price and wage deflation necessary as part of the process of getting out of this mess. They want people to maintain their current wage levels (even though unemployment is going through the roof); they want people to maintain their current mortgages (even though housing prices are dropping like a rock); they are printing money like mad in hopes that it will keep prices high. And all of it won’t work – it can’t work. There isn’t in the United States the actual wealth to justify the pre-depression prices of goods, services and labor. The sooner we let the crash finish its business, the sooner we can all get back to work rebuilding our wealth.
All the Democrats are doing is putting off the day of reckoning – and ensuring that when it comes, it will be worse than it had to be.
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