Vice President Dick Cheney infamously informed former Treasury Secretary Paul O'Neill in 2002: "Paul, Reagan proved deficits don't matter." Now comes news that bailout-mania combined with already out-of-control domestic spending and foreign wars may lead to the first-ever trillion dollar deficit during the current fiscal year.
The enactment of the now-notorious $700 billion bailout package did not stop the downward slide of the stock market, as its proponents had promised. Recall that when the stock market took a steep drop on the day the House rejected the first bailout bill, hysteria-mongers on Capitol Hill and in the news media warned that that steep decline was a harbinger of things to come unless a bailout was passed, and quickly.
The much-ballyhooed international economic summit in Washington is over, and, according to news reports, little was accomplished aside from agreement on various vague goals by the delegations from 21 nations and four international organizations in attendance. There were no flashy resolutions and no dramatic makeover of the global financial system — yet.
For years, the so-called economic experts — Ivy League economists, Federal Reserve chairmen, Treasury Secretaries, and media financial analysts — have been selling a bull market. Buy, buy, buy; spend, spend, spend; borrow, borrow, borrow. But the running of the bulls on Wall Street has now turned bloodier and uglier than the annual carnage on the streets of Pamplona.
The pleading for a financial bailout of the U.S. auto industry is becoming more widespread and insistent. Governors from Michigan, Kentucky, Ohio, Delaware, New York, and South Dakota have added their voices to those of auto executives urging U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to share with automakers some of the $700 billion earmarked for Wall Street. They claim that Detroit's Big Three (General Motors, Ford, and Chrysler) are too big to fail, since one out of every 10 jobs in America depends on the auto industry. In addition to the hundreds of thousands employed directly by the automakers, millions more work in the industries that supply steel, aluminum, copper, plastics, rubber, and electronics to them.
By now everyone knows that Congress and the White House approved an enormous $700-plus billion package a short time ago and that the Treasury Department is rapidly burning through that mountainous sum and asking for more. What wasn't known until the past few days is that the Federal Reserve has been "lending" hundreds of billions of additional dollars to troubled companies and institutions. In fact, the Fed may have already dished out nearly $2 trillion!
If the language in his first post-election press conference is any indication, Senator Barack Obama will be true to his profligate campaign promises. He pledged in that November 7 press conference a variety of vague new government initiatives that would appear to require massive new federal spending.
Lost in all the Obama furor, the world's leading economic powers — the so-called G-20 nations — are quietly laying plans for a November 15th summit in Washington, D.C., that may effect a revolution in world finance and global governance, a revolution with potentially much greater long-term impact on America than anything on President-elect Obama's agenda.