At the request of my friend and fellow contributor to The American Catholic, Darwin Catholic, I will elaborate more on some of the general points I introduced to the discussion over his latest post about economic morality. For those who did not follow the exchange (of me versus everyone, understandable on this somewhat more conservative blog), I questioned the accuracy of any scientific theory of economics that did not take into account class conflict (or, as some insist on saying, “class struggle”). Darwin and others responded by questioning the validity of the very category of class. Hence, we have a great deal of ground to cover – I hope you will bear with me, and that we all end up learning something.
After a few delays, Pope Benedict’s long-awaited third encyclical on economic and social issues is set to be signed tomorrow, June 29, and released to the public on July 6 or 7, according to Catholic News Agency.
We here at American Catholic have had our share of lively debates over the meaning and application of Catholic social doctrine. I anticipate that they will continue following the release of this encyclical. This is a historical event of great importance to Catholics all over the world. Like some of his predecessors, and particularly Pius XI, Pope Benedict will be addressing the world on social and economic matters in the midst of a world wide economic crisis.
It was the crisis itself that reportedly caused the delay in the completion of the encyclical, and as it would be reasonable to assume, it is now clear that much of it will deal directly with the breakdown of the financial system in particular, and with the phenomenon of globalization in general.
President Obama gave a speech today on the economy and the agenda of his Administration and Congress, thus far into his presidency. I personally watched the speech. I have yet to go back and read it. I thought it might generate some good discussion, in collective analysis of the text. In the spirit of Easter, please engage with criticisms of his positions, not of his person or broad generalizations that are not necessary or charitable.
It has now been twelve weeks since my administration began. And I think even our critics would agree that at the very least, we’ve been busy. In just under three months, we have responded to an extraordinary set of economic challenges with extraordinary action – action that has been unprecedented in both its scale and its speed.
I know that some have accused us of taking on too much at once. Others believe we haven’t done enough. And many Americans are simply wondering how all of our different programs and policies fit together in a single, overarching strategy that will move this economy from recession to recovery and ultimately to prosperity.
So today, I want to step back for a moment and explain our strategy as clearly as I can. I want to talk about what we’ve done, why we’ve done it, and what we have left to do. I want to update you on the progress we’ve made, and be honest about the pitfalls that may lie ahead.
A look at the federal budget since 2000, with projections, for what little they are worth, by the White House and the Congressional Budget Office to 2019. By CBO estimates last week, the budget deficits between now and 2019 would total $9, 300, 000, 000, 000.00. The entire cost of WW2 for the US in 2008 dollars was 3.6 trillion. This year the budget deficit will total 13% of our gross domestic product. This isn’t economic policy, it is lunacy. These type of deficits are completely unsustainable, and we are running towards national bankruptcy. It is impossible to borrow these type of funds from abroad. We will simply create the funds out of thin air. The long term impact on our children and their children can be easily imagined. As the Heritage Foundation points out, this is a completely bi-partisan disaster. Politicians have acted like teen-agers with stolen credit cards for far too long. However, this will stop. It will stop either by voters throwing out of office the fiscally irresponsible, or, much more likely in my estimation, the economy will simply hit a brick wall. This will not, cannot, go on. How it is stopped is up to us.
Update I: The President of the EU slams current US economic policy as a road to hell. I never thought I would live to see the day when a President of the EU would have more economic sense than a President of the US.
“Bond prices fell after the auction of $34 billion in 5-year Treasury notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 2.77 percent from 2.71 percent late Tuesday. The yield on the three-month T-bill rose to 0.19 percent from 0.17 percent Tuesday.
Investors gave an unexpectedly cool response to the note sale just a day after a $40 billion auction of 2-year notes suggested strong demand. The government is running up huge deficits in order to fund an array of plans to provide stimulus to the economy and support to the ailing financial system. Any suggestion that demand for U.S. government debt is weakening is a negative for stocks, simply because Wall Street has been relying so heavily on the government’s rescue plans.
The surge of worry over the debt auction wiped out the market’s early optimism in response to durable goods and home sales data.”
As Glenn Reynolds at Instapundit notes here, since the passage of the Bankrupt the Nation Act of 2009, erroneously referred to as the Stimulus Bill, the Dow has lost over 1400 points. Since the election of President Obama, the Dow has lost over 2700 points as detailed here. However, in the midst of the greatest Bear market in a generation, our President has financial advice for us: Buy stocks!
Critics of the Bush Administration often complained (especially during his first term) that Bush used 9/11 as a justification for nearly everything he did. Given that the country was widely supportive of the administration in the years right after the attack, this was (the complaint went) a way for Bush to do things he’d wanted to do anyway under the guise of responding to an emergency. While I think this complaint was overstated, there is an element of truth to it. For instance, I don’t think there’s a whole lot of question that many within the administration (rightly or wrongly) wanted to get rid of the Baathist regime in Iraq even prior to taking office.
In this respect, Obama seems to have found his 9/11, his excuse for doing all the things he and his party want to do while assuring everyone it would be a Very Bad Idea it not Downright Unpatriotic for them to disagree. Obama’s 9/11 is the recession, or as the media seems to have named it “The Worst Economic Downturn Since the Great Depression”. (This is, to my mind, a rather unwieldy name. Perhaps we could just call it the “Big Recession” or the “Little Depression”?)
Thus, in his presentation of a new budget which is heavy on partisan measures (big tax increases on “the rich” and preparation for major changes in social service structure and spending) and racks up the largest deficit (as percentage of GDP) since 1942, Obama assured people that this was necessary in order to restore the economy:
It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation….So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.
Not exactly an enthusiastic endorsement. Today’s Washington Post has some of the back story:
Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.
A month into the Obama administration, who could it be that left-wing firebrand economist and New York Times columnist Paul Krugman is denouncing? Is it the dividers? Is is the extremists? Is it the old way of politics?
Has anyone ever wondered if it is possible that one can land in a financial crisis when one has a steady income, no debts, and a large reserve of money in case of emergencies? Certainly, I suppose, if something devastating comes around, like an accident that requires weeks in the ICU, surgeries, and a long rehabilitation, that could bankrupt a person. Yet such accidents, on a whole, are rare, and most people who live a financially responsible life never have to plead for a bailout.
When we look at our current financial crisis nationwide, I can’t help but wonder what people are thinking. President Obama has promised us trillion dollar deficits for years to come in an effort to restore our economy. Like most right-leaning folk, I’m under the impression that our current crisis has come from overspending, living beyond our means, and not being prepared for when we hit bumpy times in the economy (like $4/gallon gas, which drives prices up all around). Perhaps, if this view is incorrect, someone will be willing to explain to me why it is so. But my impression has been that first, people individually are consumed with buying, buying, buying, even when they don’t have the money to buy. I have friends who, though they grossed over $60,000 a year, were still living paycheck to paycheck because of their deficit spending. I’ve seen people who, upon receiving their government money, have gone and blown it on new cell phones (that are shut down after two delinquent months), on fancy steack dinners, and so on, instead of buying necessities or saving up what they can. I’ve seen people struggling with hundreds of thousands of dollars of accumulated debt that came from student loans, house loans, car loans, credit cards, and so on. This is just what I’ve seen. What I’ve heard–word of mouth, or in the news, or on blogs–is even worse.
The market reacts to the bank bailout plan: