WHEN THE CURE IS WORSE THAN THE DISEASE
April 23, 2009
The scale of the federal response to the banking crises and economic meltdown has come as a frightening surprise to many Americans, who suspect the cure will be worse, and less transitory, than the disease, says Steve Chapman, a columnist with the Chicago Tribune.
Since last September, a federal budget that was already growing steadily suddenly accelerated out of control, says Chapman:
- The ride began in the winter of 2008, when Congress and President Bush agreed on a fiscal stimulus package of $170 billion in tax rebates and incentives.
- It picked up speed in the fall, when the Treasury spent $85 billion to take over insurance giant AIG and Congress approved $700 billion to rescue failing financial institutions.
- By the time Barack Obama took office in January, projected federal outlays for this year had soared by nearly $1 trillion over last year, and the budget deficit had nearly quadrupled.
- He immediately pushed through another fiscal stimulus program with a price tag of $787 billion.
The problem is not just the spending supposedly needed for the current economic emergency. Obama claims that he will cut the deficit in half, to $533 billion, by the end of his first term. However, there are several problems, says Chapman:
- The Congressional Budget Office says the more likely number is $672 billion.
- That figure is 46 percent more than the deficit in 2008.
- Worse yet, the CBO says the deficit will then resume its upward trajectory, reaching $1 trillion by 2018 and nearly doubling the national debt over the next decade.
The country has gotten into a painful fiscal predicament because both parties have let us believe we can have more and more goodies from Washington at no additional cost. The recent explosion of federal spending has succeeded in one way: It has exposed that assumption for the fiction it was. We now face the bleak truth that the comfortable future we expected is gone. Everything the federal government is doing will be forcibly extracted from our future earnings, says Chapman.
Source: Steve Chapman, "The truth behind the tea parties," Baltimore Sun, April 22, 2009.
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