Obama deficit commission is a path to crisis

February 19, 2010

First, here is a bit from my Reuters Breakingviews column:

President Barack Obama might have stumbled upon a three-step path to financial crisis: 1) admit nation is dangerously in debt; 2) create high-profile deficit commission to find solution; 3) have commission fail. Subsequent market tumult could, of course, force a sudden, dramatic and harsh fix to America’s fiscal ills. But a rush job would be a poor way to solve the country’s long-term financial problems.

The immediate casualty of failure, however, would be the markets. Recall the House’s first vote against the $700 billion bank bailout in September 2008. The Dow industrials fell an unlucky 777 points in a flash. The bill passed two days later when panic set in on the Hill. Failure of the commission would send a frightful message to investors globally who have continued to buy trillions in Treasuries under the assumption hard budget choices would eventually be made.

True, a market jolt would again focus Congress’s attention. But that risks a hasty, ill-considered budget fix such as hiking taxes without a structural reform of America’s social insurance system. That would really be no solution at all.

Me: It’s like there arent’t all kinds of plans to cut spending. But Americans need to decide if they want to close the long-term budget gap through lower spending or higher taxes.


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That, James, is going to be the problem. Can the American people be alright with lower taxes, but then lower spending or are they okay with higher taxes and a continued high spending. The American people have loved the programs they get, but have been unwilling to pay for it.

Posted by Jacob | Report as abusive

How about a program that pays for itself without dependence on taxpayer subsidies, insurance companies, or gambling??

How about a complete clean slate of national debt, trade deficit, health care, pharmacy, national defense, and much more??

Would anyone be interested??

Posted by wwhitteker | Report as abusive

I want the $3 trillion we spent in Iraq back. At least we should re-take ownership of Iraq’s oil. We need the money badly. Could the commission take care of that? Delta Flight 253 details from a flight attendant at http://storyburn.com

Posted by Voomie | Report as abusive

The markets crashed because the drug addicts wanted to run the pharmacy. They were allowed to do so. The addicts then went to town inventing “products” designed to maximize profit while leaving someone else holding the bag.

Corporations are of course the addicts I’m talking about. They achieve their goals by using their rights as citizens to lobby congress to get the rules they have to follow relaxed enough to let them gain control. Human citizens get pushed out of government because individuals can’t compete financially with corporate constituents.

Our system is jacked because the corporate voice is louder than the voice of the citizenry. Corporate citizens are railroading our government down a destructive path. They need to be stripped of their citizenship. Strike down corporate citizenship and it will be easier to get our economy back on track.

Posted by Benny Acosta | Report as abusive

First: “…investors globally who have continued to buy trillions in Treasuries..” Wrong. The dirty secret is that the Federal Reserve is buying our debt. Probably 80% of it last year.

Second: “But Americans need to decide if they want to close the long-term budget gap through lower spending or higher taxes” It’s not an either/or proposition. It’ll be both spending cuts and tax increases.

Posted by Fred Schwartz | Report as abusive

The U.S. deficit spending is for the purpose of funding the CORPORATE AND WEALTHY WELFARE KINGS BY TRANSFERRING THE WEALTH of the working classes to the weathy It was Reagoon who started the huge Federal deficits for the purpose of transferring the wealth of the working classes to the WELFARE KINGS. This was/is the reason for the Federal deficits, to privatize profits and socialize coproate losses. First, corporate personhood needs to end and the illegal withholding tax on labor must end. When Reagoon took office their were 400 lobbyist in Wash., DC today 45,000, all funded by deficit spending. Without Fedral deficits their would be no need for lobbyists.

Posted by ke lusk | Report as abusive

[…] James Pethokoukis offered some insightful commentary on the President’s much-heralded deficit commission: President […]

Posted by race42008.com » Blog Archive » Greater Risk Than Reward With Obama’s Deficit Commission? | Report as abusive

Unending anticapitalism propaganda is being done by the leftist media. Ironically, while they survive only because of capitalism.

My Latvian grandparents were small-time farmers but had to go live in kulaks so that everyone could be “equal.” Destroyed most of the Baltics.

Posted by Regina Ingrid | Report as abusive

[…] Rueter’s economist, James Pethokoukis, wrote the other day that Obama’s debt commission may be a dangerous risk. He points to the effect on the stock market when the House failed to pass the TARP bill the first time around. The uncertainty cost the NYSE 777 points that day, and spurred it’s rapid descent afterwards. What if Congress should reject the commission’s findings? What if the commission is too honest and America becomes more aware of it’s massive public debt? We can look to the history of the French Revolution for what the result was from the first time massive government debt was made public knowledge. […]

Posted by American Debt & the French Revolution, Ominus Similiarities » Right Pundits | Report as abusive

Maybe it is not a bad idea for the American public to be aware of the levels of public debt we eventually will have to deal with. I can picture the pressure our representatives and senators would have to endure. I want to be optimistic amd believe that the pressure from their contituencies would force them to pay more attention to the public interest than the interests of corporate citizens and their lobbysts.

Posted by Michelotto | Report as abusive

“But Americans need to decide if they want to close the long-term budget gap through lower spending or higher taxes.”
Enough with false dichotomies. What spending are we going to cut? Are you going to tell the American people that you’re going to quit paying entitlements? Are you going to quit paying for their security? No amount of spending cuts is going to affect the debt without in the absence of economic growth. You cut spending wherever you can, invest responsibly to spur growth and raise taxes when you absolutely have to. One of the biggest hindrances to getting us out of the ditch we’re in is politicians trying to shove one solution or the other down our throats.

Posted by Kevin Smith | Report as abusive

Virtually all of America’s fiscal woes could be addressed quite simply: stop giving a huge chunk of our economy away tax-free to foreign exporters. Return to a sensible trade policy that employs tariffs to assure a balance of trade as was done for the first 171 years of our nation’s history, before the advocates of radical “free trade” economic theories hijacked our trade policy. There was a time when all federal revenue came from tariffs and there was no such thing as an income tax. The deficit would easily be cut in half and all of our manufacturing jobs would come back home. Economy fixed. Unemployment fixed. Health care affordability fixed.

Posted by Pete Murphy | Report as abusive

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