Thursday, January 15, 2009

Bush's Deficit May Doom America

By Robert Higgs
January 15, 2009

According to a recent report by the Congressional Budget Office (CBO), “the [federal budget] deficit this year will total $1.2 trillion, or 8.3 percent of GDP.” This seems about right for a banana republic.

Read on.

1 comment:

Anonymous said...

Mr. Higgs,

I liked your article on I know you must make an effort to keep it short. But I would like to add to the conversation thoughts that I’m sure you already know.
The debt cannot and will not ever be repaid. We know this. The interest will be due every year. And there will come a time soon (if not already) that we have to borrow money to pay the interest. The interest at these artificially low interest rates is nearly 300 billion dollars a year. When interest rates are forced up, and they will be, we can expect that figure to double or more. I don’t have formal training in economics but this is common sense. There is a word for this situation.
You may not agree but the only way we as a nation can turn this around in the long run is to bring back middle class jobs to this country. At this very moment China is desperately trying to create a middle class with disposable income and we are dismantling our middle class. We are exporting our good jobs and those we can’t export we are importing cheap labor to fill. As I see it, the only way to stop the national bleeding of wealth (trade deficits) is to impose an import duty tax. Of course prices would go up but the money would stay here in the U.S. At the very least an import duty tax on imported Oil! Not a tax on gas. A tax on gas would still allow money to leave the U.S. The uneconomic capped oil wells in this country (and there are many of them) would soon be put back into production. The taxes raised would improve the government’s budget picture. The European’s have high taxes on gas products (and maybe all petroleum products) for a good reason. They don’t have any oil, it’s nearly all imported. For every dollar spent for oil they have to produce and sell/ship something out to bring back the dollar otherwise it will result in an economic calamity over time. I know the MS media has repeated over and over again as if it’s gospel that it was trade barriers / trade wars that caused the great depression. No, it was the collapse of the banks evaporating trillions of dollars in wealth that caused the depression. Again, this appears to me as common sense, you cannot continue to run enormous trade deficits without substantial risk to the economy.
Just reading the news lately, I don’t think the Chinese will be so forth coming in loaning us untold amounts of money, since they are going to spend a pile on their own economy to try and prevent collapse, and trade income is shrinking for them. I could go on and on but time is running out.
Another point you made, about the main stream media. This is a propaganda machine. Two examples. They Republicans like to say/repeat that when Reagan and Bush lowered taxes for the rich and corporate giants, that tax revenues went up. See, proof it works. Did anyone in the media ask or point out that it sounds counterintuitive. Did anyone point out that at the same time they cut taxes for the rich they also were borrowing trillions of dollars and pushing it into the economy? Doe’s it occur to any of these dolts that this borrowed money produced tax revenue every time it changed hands? If they had not cut taxes and just borrowed the money would it have produced increased taxes? Of course it would have. If they had just cut taxes (and government jobs and services) I can guarantee you it would have started a downward spiral and taxes too. Again, I think this is reasonable thinking, not something our MS media is going to point out.
The other example is the so-called surge. The surge is working, the surge is working. Repeated over and over. Something I knew by just doing a little reading and paying attention is the fact that the Sunni nations were pumping in millions of dollars into the Sunni areas many months before the surge began. They were basically paying protection money to the Sunni warlords and their insurgent fighters. Please don’t shoot or bomb the Americans, here’s some money. The facts are right in front of us.
The fighting was diminishing 5 or 6 months before the first surge troops even began trickling into Iraq. The Saudi government was pumping in millions of dollars but would not say to go where or to do what. Our general got there and saw what was going on and made it American policy. Remember, “we will not give amnesty to insurgents with American blood on their hands”? Well it turns out we not only give them amnesty, but $300 a month to stop shooting at us. News item, “A hundred thousand small arms missing in Iraq”. Guess where those small arms went?
Don’t get me wrong, this may be the best that we can do or expect given the situation that Bush and his Neocon buddies have gotten us into. But they should not lie to the American people, no matter how repulsive it may sound. There should be a conversation about this in real terms. There could be unexpected and bloody consequences from this policy change. Fact, the Sunni warlords and there fighters on our payroll now are nearly equal in number as the Iraqi army. We have a very unstable situation with a 4-way power struggle, the Shiites, Sunni’s Kurds and U.S. demanding the Oil rights to more than 80% of the oil. Well they are not all on our payroll anymore. We have coerced the Iraqi government to pay the insurgents. (They are an occupied country). This may not last.