Budget Deficit: The U.S. Would Not Qualify for EU Membership by Gregory Hilton

At the beginning of 2008 no one would have imagined the French Senate would soon be lecturing us about the need for fiscal responsibility. Unfortunately, they do have a point. Our budget deficit is now worse than Cuba’s. Because of our spending programs we would not be eligible for membership in the European Union. The European Union’s Stability and Growth Pact adopted in 1997 requires a budget deficit to be less than three percent, and requires a national debt beneath 60 percent of Gross Domestic Product (GDP).
The necessary U.S. reductions are massive. According to the Congressional Budget Office, the 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent. This is a ratio of publicly held federal debt to gross domestic product (GDP, or the economy). This is highest since 1950 (80 percent) when we were recovering from WW II.
Treasury Secretary Geithner and NEC Chairman Larry Summers are refusing to rule out a tax increase, and in a complete reversal from last year, Obama supporters are now saying this is necessary. Economic recovery has returned to Wall Street, but not to Main Street. As soon as it does, senior officials of the Federal Reserve are telling us interest rates will be raised in order to avoid inflation.
The U.S. banking system has increased surplus reserves from $1.8 billion in 8/08 to $832 billion in 8/09. Private sector liquidity is vapid, and a tax increase could wallop our nation into a disaster.

The $787 Billion Stimulus is Failing by Gregory Hilton

Unemployment hit 9.8% today. This chart compares actual unemployment with what the Obama Administration promised in February from the $787 billion Stimulus. The Stimulus was enacted without a single Republican vote in the House and only two in the Senate. You should pay attention to this chart when listening to the Obama projections regarding deficit reduction, and the costs of health care reform as well as cap and trade.
Consumer confidence is down, we are expecting poor holiday sales, and many companies will have to struggle to survive the next six months. Robert Reich and Larry Summers are saying high unemployment will be a significant factor for years to come. That is a projection I believe.
Many of these unfortunate people are tapping or depleting their 401K’s and other retirement plans. There will not be an easy fix to this.
According to the Congressional Budget Office the true cost of the stimulus is $3.27 trillion over ten years, and 100% of this money is borrowed. The bill gives American workers $13 a week in their paychecks in exchange for passing along a $1 trillion debt to their grandchildren.
Spending for the entire New Deal in today’s dollars is only half of what this one bill costs. The New Deal equaled no more that 2 percent of the nation’s gross domestic product while the stimulus is over 5 percent, and this is just the beginning of the Obama expenditures. The Chairman of the House Appropriations Committee, Rep. David Obey (D-WI), acknowledged this by saying “The bill is the largest change in domestic policy since the 1930s.”
There is an excellent case for a stimulus and this was acknowledged by Republicans. With the markets functioning so poorly, we proposed ways to jump-start the economy. Less than a third of Obama’s American Recovery and Reinvestment Act meets the definition of stimulus — namely, that it is timely, targeted and temporary.
The legislation is 25 years of government spending proposals jammed into one bill and labeled stimulus. That is why not one House Republican voted for it. We had an outstanding stimulus in 1997 when Bill Clinton signed legislation lowering capital gains rates from 28 to 20%.