Previous posts by me make it pretty clear that I am no big fan of government bailouts.
But I am a proponent of figuring out a way to avoid them ever again. That said, the economic news today should scare even the most ardent supporter of the myriad economic stimulus plans.
The national debt now exceeds $1 trillion. The public cannot lay all that debt on the current administration.
For six years, a Republican administration and congress did an admirable job of spending money the government did not have. And they inherited a surplus.
But what is done is done. Meanwhile, I learned today that for every dollar the U.S. government spends, it must borrow 46 cents.
Street lenders would smile gleefully at this rate. They use “kneecappers” to collect debt. The government’s equivalent is taxes.
Former International Monetary Fund chief economist Simon Johnson spoke about that level of debt and what got us to the point where the government needed to step in and bail out. Johnson said that level of debt puts the U.S. in a dangerous position and he focused on the reason we landed in so much debt: huge financial institutions run amok.
Johnson made a lot of good points, but one point really stuck with me — that supporters of the repeated financial institution bailouts said those institutions were too big to be allowed to fail.
His question: If the institutions are too big to be allowed to fail, then aren’t they too big to be allowed to exist?
Equally important to how the government’s money — our money — gets used in the months ahead is what steps will be taken to prevent the same problem from happening again.
Yes, let’s keep an eye on the debt and the spending of stimulus money.
But let’s keep the other eye on how our leaders plan to avoid a sequel to this very bad movie.
Resources:
- http://www.npr.org/templates/story/...
- http://baselinescenario.com/
- http://stimulus.org
- http://www.brillig.com/debt_clock/
- http://zfacts.com/p/318.html
- http://www.msnbc.msn.com/id/17424874/
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