Like the hangover which inevitably follows the drinking binge, the realization is setting in that now we have to pay for the $787B just spent — which will really grow to more like $3 trillion with interest and a bank bailout thrown in. (Yes, it sure does add up.)
The Washington Post observes:
The issue then becomes how to pay for it. The nation can’t sustain trillion-dollar deficits without driving up the debt owed to private investors to dangerous levels that could undermine the nation’s global economic dominance. That debt now stands at nearly $6 trillion.
Well, the Democrats can just raise taxes, right?
“You can’t tax your way out of this,” said Brian Riedl, a budget analyst at the conservative Heritage Foundation. “You’d have to raise taxes by $8,500 per household in order to close a trillion-[dollar] deficit through tax increases alone.”
Riedl noted that federal spending will rise to more than 26 percent of the nation’s overall economy this year, driven by the $700 billion rescue of the U.S. financial system and the government’s seizure of mortgage giants Fannie Mae and Freddie Mac, as well as the stimulus package. Tax revenues, meanwhile, are forecast to drop to about 16 percent of the overall economy, in part because the recession is reducing earnings and cutting people’s tax bills.
Hmm. Well, the president is talking about a “fiscal responsibility summit.” The language is exquisitely vague:
Obama has said he wants to tackle the toughest issues in Washington: making a Byzantine tax code simpler and fairer, reducing the skyrocketing rate of growth in Medicare and Medicaid, and assuring that Social Security will survive for future generations.
But the options are clear: radically cut benefits or radically raise taxes. There is no mysterious solution to “assuring” social security’s future or to narrowing the budget gap. The problem was daunting before and we have now made it much worse, because we have widened the chasm between receipts and spending and because the large stimulus bill and increased debt, as CBO predicted, will likely slow economic growth.
The president and his spinners declared this all to be a “long term” problem that had to take a back seat to the short term “solution” for the recession. But little they have done in the short term will improve the economy, which by their own calculations would have begun to bounce back on its own by the end of 2009.
The “long term” problem is now. The first act comes with the next major auction of Treasury debt. Are we going to start printing dollars ourselves to buy up Treasury paper? Raise the interest rate on bonds to keep Chinese and other investors in the game? The notion that the government, having gorged itself at the Pelosi/Reid trough, must now be put on a diet reveals just how confused and confusing the administration’s economic approach is. Perhaps they should have thought more about the long term before compounding our short term problems.