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:
Barack Obama appointed Nancy Killefer as his "chief performance officer." It will be her job to find government waste to cut. Obama hopes to cut much of an expected $1.2 trillion federal deficit. (Most of this deficit takes the form of new bailouts and stimulus packages and can be cut anytime — but that's not "waste" in the mindset of the incoming Obama administration, which is pushing for both more bailouts and stimulus.) Killifer's problem, as aptly described by David Greising in the Chicago Tribune: "Name a government function, and there is likely a critic who sees nothing but waste, countered by an advocate who will defend every penny spent."