With the passage of the $787 billion Obama-Democratic Congress stimulus bill, the die has been cast for America's economic future. This, the largest appropriations bill ever passed by Congress, is being variously criticized and applauded from all sides.
Newsweek magazine published the following headline on the cover of its February 16 issue: “We Are All Socialists Now: The Perils and Promise of the New Era of Big Government.” Of course, it’s hard to imagine that we have only now entered the era of “big government” — weren’t we there already? But there is no doubt that both money creation by the Fed and spending by the federal government are accelerating to finance the proliferating bailout and stimulus programs.
The credit rating of the U.S. government is falling fast. Treasury debt mechanisms have crashed in bond markets this year, forcing Treasury officials to offer a spiral of steeper discounts at auction. Investors are becoming increasingly reluctant to purchase the notes in the face of a rising flood of debt that will be floated by the Treasury Department this year.
“Easily in fiscal year 2009 it’s not out of the realm of possibility to have a $2 trillion deficit,” Mary Ann Hurley, vice president of fixed-income trading in Seattle at D.A. Davidson & Co, told Bloomberg News on February 3. “That’s a huge number, and it has to be financed by debt issuance and the taxpayer.”
President Barack Obama blamed the current economic recession on “a binge of risk taking” by bankers in a Today Show interview that aired February 2. Specifically, here’s how Obama explained how the nation has found itself in a deepening economic crisis: