The Economy In the View of an Ordinary Citizen

The country is awash in news and numbers about the national debt and the run-away spending habits of our government. I am not expert in fiscal affairs; but some things seem clear to me, which I would like to share with you.

We are all aware that the government has agreed among the various legislators to raise the debt ceiling by $2.4 trillion over the next 10 years. This is supposed to be accompanied by extensive cuts in federal government spending. (Who believes that?) In the past, we have seen the national debt rising by $3.95 billion every day since 9/28/07.

Now, a bond rating agency, Standard and Poor, has downgraded the value of our federal government’s promises to pay back its loans (bonds) to a AA+ rating. This means that S&P believes the government is becoming unable to pay back its loans.

We are told by our leaders that the answer to our financial problems is more spending “to stimulate the economy” and higher taxes to raise the money for the spending. Fortunately for us, there is an exact model for this kind of fiscal policy right in front of us. In 1997, Japan experienced the same problem as the United States is experiencing now; and they followed the same policy decisions as those being promoted by our leaders. The result for Japan was a horrendous double dip where its GDP contracted for five quarters and its banking system went down with it. As a result, the deficit, instead of contracting, increased by a whopping 68%! It took Japan ten years to climb out of this policy mistake. If Washington fails to learn from the Japanese mistake and stays the course along the August 2nd agreement toward fiscal consolidation when its private sector is still deleveraging, the probability of the US economy falling into double dip is not insignificant.

Right now, our national debt rests at $42,026 for every man, woman, and child in our country.

The President is urging us to disbelieve the predictions of Standard and Poor. He is still claiming that his old Keynesian policies of tax and spend are the answer to our debt problems. I would ask you: Whom do you believe the most, Standard and Poor or the federal government? Whom do you think has the most financial expertise? Well…I don’t think I, personally, have much doubt about the answer to those questions. The feds have lost credibility in my mind.

The administration is telling us that the whole problem is due to mistakes made by the Bush administration. But, I ask you, “Who was in charge of the money situation of this country when the excess spending took a marked increase?” The spending of the Obama Administration makes President Bush look like a tight wad.

As we look at this dismal situation, we should ask ourselves what we can do about it. THERE IS AN ELECTION COMING UP.