Watch CBSN Live

Column: A State Of Economic Turmoil

This story was written by John Glaser, Massachusetts Daily Collegian

On the eve of Bush's departure from office, barely anybody is unfamiliar with the ever deepening hole of debt this administration has conferred upon this country. In defending the invasion of Iraq and simultaneously cutting taxes, vice president Dick Cheney blithely reminded us a few years ago that "deficits don't matter."

Obama has, in recent weeks, candidly assured us he will hold the same view in applying his agenda: uninhibited spending of money we don't have for hopeless political schemes superficially meant to save us from anything that the powerful deem villainous, be it Saddam or Wall Street.

Concern for deficit spending and indebtedness (now in record territory) takes a back seat, he says, to his expensive but enlightened deeds of control.

At the forefront of this promotion of profligacy are economists of the Keynesian ilk. Paul Krugman has been pressuring for "a very large fiscal expansion to keep the economy from going into free fall," as if federal squandering of capital has a negative correlation with a poor economy.

Excessive government borrowing and inflation discourages private investment and drives up interest rates; never a recipe for economic recovery.

Even if we accept Krugman's and Obama's propositions as plausible, we still have no reason, historical, logical or otherwise, to believe that this fiscal expansion will be of a responsible and effective nature. The chairwoman of the oversight panel for these bailouts said just this week that the government has no coherent strategy for easing the financial crisis.

They are clueless, but wrongheaded too because with more spending prerogative, the government has more power. With more power comes more trillion-dollar wars, more harmful social constructions and less accountability.

All this scrambling to preempt economic hardship stems from the American belief in the permanence of economic growth, which, journalist Robert Samuelson says, is exactly what has undone economic growth.

"Initially triggered by falling inflation and interest rates," he says shooting stock prices and then home values "induced speculative dizziness" and led to "bubbles that burst in 2000 (for stocks) and 2007 (for homes)."

It was, in part, this assuredness that home prices would always be worth more tomorrow than today - and that economic growth is a given along any timeline - which led to our current downturn.

This same attitude in government explains the rampant scuffling to bail out banks and investment firms and manufacture a "New New Deal" with this fiscal expansion.

We might be wise to accept the economic consequences of living beyond our means, but instead we devalue the currency, bailout financial giants and lobby for government to overspend.

Running up deficits implies that Washington need not pay for its schemes with an increase in taxation, but that the government spends beyond its income. They do this by borrowing as much as possible and by inflating the money supply, which makes us all poorer.

When the Federal Reserve increases the money supply, they do it by buying U.S. Treasury securities from banks with money that hadn't previously existed. This has various negative impacts on the economy, but for all his vouching for blue collar workers and the middle class, Obama seems not to care about the worst of inflation's affects: the redistribution of wealth to the already wealthy.

Those who receive new money from the Fed first - government contractors, big banks and financial institutions - benefit from the increase in money before it has had its affects on prices in the broader economy. That is, before it hurts us.

So hereis Obama, warrior of the modest and plighted, supporting massive bailouts to corporate America and advocating a social policy to be implemented via inflation which naturally pushes wealth upward. Behold, America's post-partisan savior.

The federal government has spent about $1.4 trillion (of money they don't have) so far on the financial system. And already, Obama and his team are talking about another stimulus package costing upwards of $500 billion.

These are absurd sums, historically unheard of and which dwarf most other significant government expenditures of this century combined. Yet, we have people encouraging this recklessness.

Heartening the government to spend and splurge and care not for fiscal restraint is treacherously irresponsible. America is the most indebted nation in the world at over $10 trillion and counting.

At a time when our institutions are subject to less and less accountability - a trend significantly sped up by Bush's time in office - government profligacy, control and dependency will not be our salvation. It will be our downfall.

View CBS News In
CBS News App Open
Chrome Safari Continue