Impending Doom

Terrorists . . . bird flu . . . nuclear weapons . . . global warming . . . the world is coming to an end, no? No. It seems to me that people generally exaggerate their current dangers and alarmists are always calling for the end of the world, yet it never gets around to happening. Look at the popularity of disaster movies (Armageddon, The Day after Tomorrow, etc.). Look at the popularity of the Bible's book of Revelation. There seems to be some self-centered need to think that our crises are more important than anyone else's have ever been.

So I'm not predicting the collapse of our national economy or anything, but I do have a bad feeling about the direction it's headed. We (and by we I mean the current leadership whom I did not vote for) keep putting ourselves into greater debt while alienating ourselves from more of the world. Our international corporations may be taking over the world, but our government is not. And private citizens seem to be following suit, as we now have more debt than savings on an average individual level as well. It seems like sooner or later it's all got to catch up to us.

Politics Drives a Senate Spending Spree

WASHINGTON, March 17 — The largess demonstrated by the Senate in padding its budget with billions of dollars in additional spending this week showed that lawmakers are no different from many of their constituents: they don't mind pulling out the charge card when money is tight.

Just hours after opening a new line of credit through an increase in the federal debt limit, the Senate splurged on a bevy of popular programs before approving a spending plan that was as much a political document as an economic one, its fine print geared to the coming elections.

Forced to choose between calls for renewed austerity and demands for more money, many Republicans joined Democrats in reaching deeper into the Treasury, leaving the party's push for new fiscal restraint in tatters. . . .

Yet we need to keep cutting taxes?

The Weak Recovery and the Coming Deep Recession

Commentary: It looks like the next recession will be deep and difficult to escape.

. . . After having been wrong once, it’s either brave or foolish to make a second prediction that the next recession will be deep and difficult to escape. But the facts point to it being just that—despite the optimism of the Federal Reserve. This is because the economic factors that helped escape the last recession have been largely exhausted, and will not be available to fight the next recession.

The main reasons why the last recession was so relatively mild are the federal budget and interest rates. In fiscal year 2000 the federal government ran a budget surplus of $236 billion dollars, but within three years this had reversed to a deficit of $378 billion. The overall budgetary U-turn was therefore $614 billion dollars, equal to about six percent of economic output (gross domestic product). This turn provided an enormous injection of spending that helped prevent a deeper recession and jump start recovery. . . .

. . . There are three significant features about this monetary easing. First, it contributed importantly to warding off the recession and generating recovery. Second, the weakness of the private-sector recovery, despite the extraordinary scale of the fiscal and monetary stimulus, points to the underlying fragility of the private-sector economy. Third, the monetary easing has promoted massive consumer indebtedness and a housing price bubble, a combination that poses grave future threats. . . .