AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (2 comments)

  1. dudette

    Well, we who are not economists all know this intuitively. I wish your message would cross the blood-brain barrier of the terminally ignorant who blithely keep placing all their faith in O and look for even more govt. This news, along with the complete cluelessness of a good deal of the population concerning our fundamental values, who see no problem with govt breaching the bounds of our Constitution willy nilly, makes me once again consider cyanide on the toothbrush…Holding out hope tho, will wait til after election.

  2. Some voters are encouraged that the Dow rose to 13,000 and that retirement accounts have risen with it and they believe it when Obama says the private sector is doing fine now (with the help of Uncle Sam). The global economy may be encouraged that US consumption is up since the big downturn, but at what cost? Obama claims to have used unprecedented measures to stuff cash into the pockets of the middle-class to get the economic furnace roaring again. But to do this, it took about $1.5 trillion in deficit spending each year of his presidency. In March 2012 national debt passed 100% of GDP (about $15 trillion at that time) and now CBO projection show trillion dollar deficits as far as the eye can see. How much time can this buy us when municipalities and states are on the verge of bankruptcy and when Social Security, Medicare, Medicaid, and the new Obamacare entitlements have unfunded liabilities, some say, in the $10s of trillions of dollars. What if governments, businesses and individuals are no longer willing to buy US government debt to keep the US middle-class spending and consuming? Money will have to be immediately printed, instead of being borrowed from the future. Inflation will dramatically rise and interest on the debt will rise along with it. And before you know it, we as a nation will begin to reap what we have sown. Obama claims he has more to do to build the new economy, but he does not build it on his own. Vote in November.

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