Sunday, June 28, 2009

How to Destroy America
Mike Rappaport

The Washington Post reports on the new CBO Report:

To put it bluntly, the fiscal policy of the United States is unsustainable. Debt is growing faster than gross domestic product. Under the CBO's most realistic scenario, the publicly held debt of the U.S. government will reach 82 percent of GDP by 2019 -- roughly double what it was in 2008. By 2026, spiraling interest payments would push the debt above its all-time peak (set just after World War II) of 113 percent of GDP. It would reach 200 percent of GDP in 2038.

This huge mass of debt, which would stifle economic growth and reduce the American standard of living, can be avoided only through spending cuts, tax increases or some combination of the two. And the longer government waits to get its financial house in order, the more it will cost to do so, the CBO says.

The CBO's new long-term forecast is considerably more pessimistic than the one it issued 18 months ago, mostly because of the recession, which has driven the budget deficit above 12 percent of GDP. But the report makes clear that the recent economic downturn did not cause the government's predicament and that the situation will not necessarily improve once the economy does. The principal cause of long-term fiscal distress is the aging of the U.S. population, coupled with rising health-care costs -- which, together, will drive spending on Medicare, Medicaid and Social Security to new heights. Unchecked, federal spending on Medicare and Medicaid combined will grow from almost 5 percent of GDP today to almost 10 percent by 2035 -- and to more than 17 percent of GDP by 2080.

Yes, it is a good time to be passing national health insurance. And that fake stimulus bill, another great idea.  Bailing out the auto companies -- nice move.   Cap and Trade -- that will help the economy.  And what we really need to handle these problems is stronger unions. 

How bad is Obama?  That's a good question, but based on these 5 months, I would say one must go back at least to Lyndon Johnson to get a President as bad as him.

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Mike Rappaport


That is an insult to Lyndon.

LBJ's spending was not even close to this

Posted by: Roy | Jun 29, 2009 2:26:45 AM

Woodrow Wilson may have been as bad; Johnson did a lot of damage, but probably less than BO. Curiously, although Wilson got almost everything wrong, they still tell school children that he was a great president. Because he had "ideals," perhaps. I don't see any sign even of those with the incumbent.

Posted by: Alan Gunn | Jun 29, 2009 5:06:26 AM

If one starts from the premise that Obama, and much of the Democratic Party generally, intend the consequences of their actions, then destabilization and destruction are the goals, not bad results to be avoided. Their most logical strategy is inflation, which will wipe out middle class savings while protecting the claims of government employees and dependents, whose payments are indexed. (What they expect to build on the wreckage is unclear.)

Does anyone expect them to react to things like the CBO report? Do you think they don't already know?

Posted by: James DeLong | Jun 29, 2009 5:40:40 AM

Great post.

Let's hope the CBO will stay insulated from partisan pressures.

Posted by: CentralVA | Jun 29, 2009 7:10:59 AM

You guys haven't been reading Krugman! Everything is A-OK!

Posted by: Tom Smith | Jun 29, 2009 9:59:59 AM