There are other reasons to worry about US debt, like the downturn, the dollar, and our entitlement problems. But when the citizens of a country with a debt-to-GDP ratio of 1 and more than a decade of economic stagnation behind them start complaining that you're not such a good credit risk, it's time to start worrying.
(Hat tip: Glenn Reynolds at Instapundit).
Wednesday, February 4, 2009
Choose Your Catastrophe
President Obama tells us that the recession will turn into a "catastrophe" if his over $900 billion "stimulus" (including health-care "reform" and green energy) isn't passed quickly. Congress should stop being "recalcitrant" as the AP puts it.
Here's a thought: suppose it's not a "my plan or catastrophe" situation? Perhaps it's "my plan AND a catastrophe;" or, more likely, an "any plan, or no plan and STILL a catastrophe" situation? I'm not blaming Obama for this, but suppose circumstances mean that catastrophe is baked into the cake already? Maybe what we really ought to be thinking about is the degree of catastrophe.
The US has no money for Obama's porkulus stimulus. It is simply not credible that Europe and Asia are going to continue to buy US treasuries and bankroll bailing out the US economy, not to mention Obama's version of Hillary care. One survey says 40 percent of Japanese investors think that there is a risk of a US government default on its debt. As Megan McArdle puts it at Atlantic:
The stimulus packages cannot be paid for with taxes -- even if the rich are expropriated wholesale. That leaves the printing press. The Obamaites, who cannot even manage to adequately check out appointees for government office, are going to wind up trying to bail the overdrawn US economy out by debauching the currency. Pardon me, but I'm a little skeptical about rapid solutions favored by Obama and Ms. 500,000,000-jobs-lost-Pelosi.
The financial contagion is worldwide. Andrew Stuttaford this morning describes Britain as "Iceland without the fish" -- that is, flat broke. A lot of that going around. There are other pots boiling: Pakistan's imploding (which is a problem with an army in Afghanistan). Putin, Chavez and the Iranian mullahs: all dissatisfied with the present world system, are all, rhetorically at least, on the march. With Obama wanting a ten percent cut in the military budget, I wonder how long their trouble-making stays rhetorical?
I could go on, but my bet would be that catastrophe is already a done deal. Sorry, it's just how I see it. If trouble's coming, it would be prudent to be very careful on where we throw our last row of poker-chips. Why make it worse by dropping a trillion dollars we don't have because the former "community organizer" says we need to hurry about it? Maybe, but some care is called for here. Congress, in other words, shouldn't be panicked or railroaded into anything.