Washington: Out Of Tune With Growth

For years after WW II the American Dollar was the currency of choice around the world — in little Costa Rica the dollar is still welcomed by cab drivers and hotel bellhops and merhants. But for how long…as the dollar continues to weaken against other currencys?


While professing to be a political and fiscal conservative, beginning in January 1981 President Ronald Reagan began to either propose or approve massive deficits and under his administration record levels of debt were incurred. The Great Communicator amassed more debt for the federal government than all presidents from George Washington to Jimmy Carter — combined! (I have not seen this figure challenged — would be interested in hearing from anyone challenging the totals.)


This as a game played by R’s and D’s, by liberals and conservatives — give the people what they want (government payments) and don’t give them what they don’t want (taxes to pay for same.)


The last time the federal budget had been balanced was in 1969 (the 1968 preparation under Lyndon Johnson, prepared by budget director Charles Zwick who went on to head Southeast Banking in Miami). All through the following years to President Bill Clinton reversed the trend we had more outgo than income. At some point, one must pay the piper, yes? Are we near that point? Bear Stearns economist David Malpass seems to be saying yes.


How long can the federal government adopt budgets that are hundreds of billions of dollars above (in spending) what will be collected (income)? While the congress and White House spar over Iraq spending, does anyone ask — where will the money come from? Or is that irrelevant now?


While we talk about “deficit” (the annual shortall) the piled up year-upon-year deficits are becoming really scary – that’s the soverign debt, now in the trillions’ of dollars. One estimmate is that all organs of the federal government may owe $50 trillion or more to bondholders.


The “compassionate conservative” in the White House doesn’t seem to be very fiscally conservative either, nor do the Republican members of Congress who often run on conservative platforms. The Dems are in charge of the budget now and they haven’t moved the needle back to neutral or beyond, to a balanced budget and pay-down of debt. Who will help us?


Every day we as a nation put on another $1 billion in debt — usually snapped up by China and other nations as investment. How long will they be patient investors?


If the OPEC countries shift to a Euro standard for US oil purchases, with the dollar at $1.60 to the Euro, what’s the impact on our economy? On the average consumer? On federal and state debt?


Notice that few of the candidates in the presidential debates (to date) talk about “debt” or “deficit” or sound fiscal policy? And few journalist-moderators ask those questions? Does anyone care?


Yes, every sovereign government has the right to use credit — wisely. Every goverment needs credit (bonds) to pay for long term investment. But what is appropriate credit use — and under what circumstances are un-balanced budgets OK? (Not for decades, right?)


Your thoughts on what David Malpass has opined here? On the national debt / deficit? On the way the USA prepares its budgets?


Hank Boerner




Accountability Central