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Deficit Rises, and Consensus Is to Let It Grow
Louis Uchitelle and Robert Pear, New York Times
Like water rushing over a river’s banks, the federal government’s rapidly mounting expenses are overwhelming the federal budget and increasing an already swollen deficit.
The bank bailout, in the latest big outlay, could cost $250 billion in just the next few weeks, and a newly proposed stimulus package would have $150 billion or more flowing from Washington before the next president takes office in January.
Adding to the damage is that tax revenues fall as the economy weakens; this is likely just as the government needs hundreds of billions of dollars to repair the financial system. The nation’s wars are growing more costly, as fighting spreads in Afghanistan. And a declining economy swells outlays for unemployment insurance, food stamps and other federal aid.
But the extra spending, a sore point in normal times, has been widely accepted on both sides of the political aisle as necessary to salvage the banking system and avert another Great Depression.
(19 October 2008)
Economists weigh in on the need for stimulus spending
David Roberts, Gristmill
[Many links from polticians and economists about the need for stimulus]
… The sensible thing to do is ask what kinds of stimulus spending could solve more than one problem at once? If, say, spending on the electricity grid is not ideal evaluated purely as short-term stimulus — it won’t get money in consumer hands as fast as some other measures — couldn’t it be defended based on the fact that it’s also an energy security and climate stabilization strategy? Seems to me we should be looking for no-regrets spending.
(20 October 2008)
Financial crisis: We’re all socialists now, comrade
Simon Heffer, UK Telegraph
A quarter of a century ago, in the era of the Labour manifesto that was dubbed (by a member of the Labour shadow cabinet) “the longest suicide note in history”, when one wanted to depict the absurdity of the view of the world advanced by Tony Benn and Michael Foot one simply had to say: “They want to nationalise the banks!” People fell about laughing.
Given the socialistic leanings of our Prime Minister, it may well have been a move he undertook calmly and, quite possibly, with a little excitement
Today, it is all considerably less funny. We are all socialists now.
For the Government to take stakes in our leading banks in order to re-capitalise them is not quite the sovietisation of Britain, but it is a pretty good start. Given the instinctively socialistic leanings of our Prime Minister, it may well have been a move he undertook calmly and, quite possibly, with a little excitement.
(9 October 2008)
The Telgraph is not happy about what they see as a move to socialism, albeit a socialism for the rich. Johanna Neuman at the Los Angeles Times points out :
If Barack Obama’s a socialist, what’s George W. Bush? writes
But the larger problem for the McCain-Palin ticket’s attempt to tie Obama to socialism is … George W. Bush.In the last four weeks, President Bush has proposed a $700-billion bailout of the financial sector, pressed his Treasury secretary to push equity into the system and met with key world leaders on how to regulate the global markets.
“The fly in the ointment for this socialism argument is the recent bank bailout,” Larry Sabato, who heads the University of Virginia’s nonpartisan Center for Politics, told CNN. “That’s probably the most egregious example of socialism in American history.”
“If you socialize enough of the financial system, it has to work”
Daniel Trotta and Karey Wutkowski, Reuters
Original headline: U.S. eyes bank equity stakes as world looks to G7
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The United States moved closer to taking equity stakes in banks on Thursday ahead of a G7 meeting of economic powers trying to stave off world financial ruin.
… That has raised the question of what options remain for policy makers to combat the market meltdown, which has destroyed lenders from Wall Street to Iceland to Germany and left people worried about the security of their savings and jobs.
“If you scour the history books, (the steps taken or being considered) are the only policy options of last resort,” said David Mackie, head of Western European economic research at JPMorgan.
“I can’t think of what else people might come up with here. Various countries have done bits and pieces. Nobody has done all of them,” he said.
“It’s not entirely obvious that these measures are turning the tide,” Mackie said. “At the end of the day, if you socialize enough of the financial system, it has to work.”
(9 October 2008)
Mr. Mackie’s quote was noted by both the People’s Weekly World. and in the Ron Paul forums.
Here comes stimulus – question is how
Jeanne Sahadi, CNNMoney
Momentum is building for a new program to boost economy. But Democrats and Republicans have very different ideas on how to do it.
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The drumbeat for lawmakers to do more to boost the economy is growing louder. And the chances have increased that Congress could pass a second stimulus package during its lameduck session following the presidential election.
Over the weekend, Ed Lazear, the president’s chief economic adviser, said that at least “parts of the country” are already in recession.
On Monday, Federal Reserve Chairman Ben Bernanke told House lawmakers that “consideration of a fiscal package by the Congress at this juncture seems appropriate” given the risk of a “protracted slowdown.”
And the White House said again that President Bush would be “open” to ideas for a second stimulus package, although press spokeswoman Dana Perino added that the administration would want to see details first before signing on. The administration believes that many of the proposals being discussed would not stimulate the economy.
Subtext: one person’s idea of stimulus is another person’s idea of pork.
(20 October 2008)
Bernanke: It’s time for stimulus plan
Chris Isidore, CNNMoney
Fed chief says lawmakers should consider another plan to boost economy. He cites risk of ‘protracted slowdown.’
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Federal Reserve Chairman Ben Bernanke testified Monday that Congress should consider passing a new stimulus package to try to jump start the economy.
Bernanke, speaking before the House Budget Committee, came just short of an outright endorsement of a package to pump tax dollars into the economy. But he clearly said the economy needs additional help from Congress.
“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” he said.
Experts said Bernanke’s testimony gives an important lift to the chances that Congress will pass some sort of stimulus package, perhaps in a lame duck session after the November election and before the new Congress takes office in January.
(20 October 2008)
