“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.”
Should the stimulus bill be amended to place more emphasis on spending, or should it instead be amended to place more emphasis on tax cuts? That question defines much of the debate on the bill that passed the House without any yea votes from Republicans and is now before the Senate.
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:
Common sense tells us that government cannot resuscitate the American economy and restore it to good health by spending more money and going further into debt. The government cannot spend money for its "bailout" and "stimulus" programs, after all, without siphoning the money out of the economy in the first place.
The House of Representatives yesterday passed the $819 billion American Recovery and Reinvestment Act, delivering President Obama his first major political victory and yet another setback to American taxpayers present and future. House Republicans, in a surprising display of partisan unity and commitment to principle, voted unanimously against the bill. Congressman John Boehner (R-Ohio) warned that such spending policies would bury the next generation under a "mountain of debt," while Congressman Dan Burton (R-Ind.) correctly pointed out that "free enterprise, less government and lower taxes is the way to solve this problem."
Congress is considering granting the Federal Reserve Bank dramatic new powers by this spring, according to the Washington Post for January 26. According to the Post, under draft legislation written by Financial Services Committee Chairman Barney Frank (D-Mass.), the Fed would “likely be given the power to gather information about the inner workings of banks, investment firms, insurance companies, hedge funds and any other entity big enough or so intertwined with other companies that it creates the risk of a systemic collapse."
Oil prices dropped from $141 per barrel to below $40, but experts say that this decline is going to end in 2009, according to 24/7 Wall Street. When oil prices tumbled, OPEC made an attempt to reduce production, calling on OPEC nations to produce less, but its efforts were largely unsuccessful because, it is speculated, some OPEC nations bucked the cartel and kept production high, maintaining falling prices. About the only thing that kept the prices at U.S. pumps from falling even lower than they did is that some California refineries shut down for routine yearly maintenance.
A recent analysis by Goldman Sachs, one of the Wall Street investment banks which benefitted from the recent federal government bailout, concludes that the Federal Funds rate (the interest rate charged by banks on loans made to other banks) is too high, despite the fact that the rate was reduced to a record low target range of zero to 0.25 percent by the Federal Reserve on December 16 of last year.
Congress is now considering the American Recovery and Reinvestment Act of 2009, the latest barrel of pork to be tossed into the recessionary pit. This time around, the misnamed stimulus will, in the self-congratulatory language of the House's summative press release, "create and save 3 to 4 million jobs, jumpstart our economy, and begin the process of transforming it for the 21st century with $275 billion in economic recovery tax cuts and $550 billion in thoughtful and carefully targeted priority investments with unprecedented accountability measures built in." [Emphasis in original.]
Round two of the economic crime of the century has begun. On January 12, Lawrence Summers, President Obama's designee to become director of his National Economic Council, sent a letter to congressional majority and minority leaders seeking the second half of the $750 billion approved by Congress last October.