"Obamanomics: bailout conservatism v fiscal splurge
Fox Business reports:
The municipal bond market is in trouble, and Congress wants to grant it a federal guarantee.
Yes, yet another contingent liability foisted upon the US taxpayer.
The House Financial Services Committee is scheduled to consider a series of bills that would provide massive government backing and intervention to the municipal bond market. Draft legislation is expected to be introduced as early as this week. A full committee hearing on municipal bonds is tentatively scheduled for Thursday, May 21, according to an internal staff schedule.
It all makes this op-ed in today’s FT - “America’s triple A rating is at risk” - nothing if not timely:
…exploding healthcare and Social Security costs threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding.
And as was reported earlier today - in a portent, perhaps, of such things - the US government experienced its first April budget deficit. April being a month in which the government almost always records a surplus, because of the tax year ending April 15th. The last time April saw a deficit was in 1983. Figures released Tuesday show the excess of government spending over receipts came in at $20.9bn, compared with a surplus of $159.3bn in April 2008.
Sean Corrigan at Diapason securities produced this graph, which rather puts that into perspective.
As Robert Teitelman over at the Deal summarises:to Wolf conservative morphs into cautious, which translates into long-term failure. Much of his larger critique of Obama hinges less on the economics of the situation, and more on a projection about the politics.
One final datapoint worthy of note: just 6 per cent of economic stimulus funds have so far been spent.
Wolf's right to worry about reforming the financial system, but we've thrown a fair amount of caution to the wind in responding to this crisis, and it couldn't be otherwise, given the fact that one man's caution is another man's insane risk.
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