Economic Crisis II
One of the many aspects of the current economic crisis that worries us at iRent2u is illustrated in the graphic provided by the Washington Post displayed below. It clearly shows the U.S. government shifting from budget surpluses in 2000 and 2001 to deficits beginning in 2002 and projected to continue at least for the next decade.
For many Americans, the out of control spending by the Republican controlled congress and President from 2000-2006 were strong indications of their greed and incompetence. By looking at the projections from the (nonpartisan) Congressional Budget Office (CBO), it is clear that we are planning to double down on the worst aspects of George W’s domestic policy. A situation so bad, even USA Today has noticed.
The supporters of the current policy defend the expenditures by reminding us that, in general, it is acceptable to run large deficits under two conditions, (1) in an economic downturn or (2) during a war. As we are in the largest economic down turn in at least the last 25 years, and maybe the last 75 years, the huge increase in government spending is therefore justified.
But haven’t we heard this before. Remember in 2000 the .com bubble was bursting all around, high tech and IT companies were imploding, unemployment was sky rocketing and then the 9/11 tragedy dealt a huge blow to the airlines, financial services and hospitality industries. Subsequently, we embarked on wars in Afghanistan and Iraq.
Thus all conditions were met for running huge deficits, which President Bush and Congress proceeded to do. At the same time, Alan Greenspan was doing his part to boost economic activity by drastically cutting the Fed Funds rate to below 2% and holding it there for nearly 5 ½ years. Which looks to be what Ben Bernanke is doing right now.
So if George W’s out of control spending and low interest rates did not lead to economic prosperity, but rather Economic Catastrophe, how will the current administration’s policy, let’s call it “George W^2”, lead to anything other than Economic Catastrophe^2…?
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