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Thursday, February 26, 2009

Overkill or Ideology?

From the proposed 2010 Federal Budget:



Notice that previous recessions 1981, 1983, 1991, 2000 elicited very different responses by the Federal government and, arguably, the market system eventually recovered. This time around the government's response is massive, but not necessarily directed at solving today's recession. At best perhaps to stave off the next recession? A deficit that is going to be approximately 13% of GDP? This would seem to be untenable.

The House finally passed LAST YEAR'S budget, which the Democrats purposefully stalled to make the previous president look bad. That bill is only $400+ billion. Let's take a tally:

Omnibus spending bill (2009 budget): $400B
Bank Bailout: $700B
Car Bailouts: $40B
Recovery Act: $800B

That's $2 TRILLION!!! spent in the past six months. This spending hasn't done much (yet) and is only a small down payment on the real cost of the 2008 election, which the president outlined on Monday night.

If there was uncertainty about what EXACTLY "change" meant during last fall, there should be no uncertainty now.

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Comments:
Do you have data on past projections? I'm just trying to get a sense of how realistic this is as an expected deficit. I'm *hoping* that it's not realistic, but I suspect that it is.
 
It's big, but is it really "realistic" to put all of the unbudgeted spending from 2008 into the 2009 budget (namely TARP)? The bigger question is, "what are we getting for it?" and the answer is "not much." There are no transcontinental railroads, rural electrification, or interstate highway types of network effects in the spending in this plan.
 
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