January 24, 2011
Undeniably. Yet, consider.
The federal deficit for the fiscal year 2011, which ends Sept. 30, is projected at between $1,200 billion and $1,500 billion.
Thus, the $100 billion in cuts the firebrands are pushing, and few think they will get, add up at best to 8 percent of the deficit and 2.5 percent of the $3.87 trillion budget Obama proposed.
Thus, at best, this Congress will only slightly reduce the rate of speed at which we are heading toward a debt default.
The last few days have brought other news bearing on the debt bomb hanging over the Western world.
The Irish, upon whom austerity has been imposed as a condition of an EU bailout, saw their government fall this weekend. Elections are in March, and the ruling Fianna Fail, at 13 percent approval, is expecting a wipeout.
Will the Irish accept endless austerity, or vote for populists who will default and let EU governments and banks take the hit?
Should Ireland default, she will not be the last to do so.
Also this weekend, the European Central Bank chief warned that inflation in the global economy—the rising prices for oil, food, minerals and precious metals—may mandate a rise in interest rates. That would be bad news for bondholders and governments everywhere, including our deeply indebted states that now borrow to cover operating costs.
Then there is the crisis in the housing market that continues to deepen.
“All previous postwar recoveries,” writes Mort Zuckerman, “have been able to depend on a growing U.S. housing market.”
But 8 million homes are today in foreclosure or their owners are delinquent in their mortgage payments. Some 5.5 million are occupied by families whose mortgages are at least 20 percent higher than the value of the property, making them prime candidates for foreclosure.
This weekend, Bank of America reported fourth-quarter losses of $1.6 billion and a 2010 yearly loss of $3.6 billion. Its credit card unit took a $10 billion write-down, and its home loan business is still reeling from the fallout of the exploded housing bubble.
Now, facing trillion-dollar deficits as far as the eye can see, House Republicans are balking at agreeing to raise the debit limit of $14.3 trillion, though the national debt just crossed the $14 trillion mark.
Are the happy days really here again?