Financial challenges facing the US

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A very interesting story from the NY Times about the crisis looming ahead thanks to the Bush / Obama economic recovery plan.

http://www.nytimes.com/2009/11/23/business/23rates.html?th&emc=th

Essentially, the Bush / Obama economic recovery plan is a lot like taking out an adjustable rate mortgage with really low teaser interest rates. When interest rates go up, the Federal government is going to be slammed. The NY Times - not what I'd call a conservative news outlet - article has a quote estimating that interest payments on the money we've borrowed will be as much as $700 billion per year in the future. That is as much as we spent this year on the economic stimulus bill and we will be paying that each year.

Now, just to review, what is Bush / Obama economic recovery plan? It involves spending lots and lots of money that the Government does not have including:
  • Economic stimulus - $400 billion under President Bush if I recall correctly, repeated by President Obama at a higher level ($700+ billion)
  • Bail out AIG - started by President Bush, continued by President Obama
  • Bail out big banks and Wall Street - started by President Bush, continued by President Obama
  • Bail out GM and Chrysler - started by President Bush, continued by President Obama
  • Continue Fed policy of giving money away free without any improvement in lending by banks or increase in jobs - started by President Bush, continued by President Obama
  • Continue shifting bad mortgages from the private sector into Government programs like Fannie Mae, Freddie Mac and now FHA with the private sector making big profits - started by President Bush, continued by President Obama

I can't resist making at least one partisan comment - didn't Candidate Obama say he was the person who would NOT continue the policies of President Bush?

Now the solution is going to have be creating a surplus in the Federal Budget that can be used to reduce the National Debt. This can be done by stimulating the economy to create more revenue - we're not seeing any of that happen yet; reducing federal spending - some reductions can occur if we actually get out of Iraq and don't replace that spending on Afghanistan; raising taxes - already planned (see next paragraph) and this retards economic growth; or some combination of these.

Raising taxes may not be a good solution because there are a number of tax increases already planned. These include a hidden tax on energy to pay for the "Cap and Trade program," taxes on health insurance that raise the cost of health insurance so we can provide subsidies so people can afford health insurance (I don't understand that logic either), and higher payroll taxes to pay for the anticipated skyrocketing Medicare costs to take care of the Baby Boomer generation.

Plus there are more government bailouts pending in the near future. It won't be long before we have to bail out the FHA, just like we did Fannie Mae and Freddie Mac, when the bad mortgages being shifted to that agency cause it to ask Congress for money. We may also need to bail out the government run Pension Benefit Fund that is insuring the pension funds that many major corporations, like United Airways, dumped onto that government program.

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