No Place Left to Hide: Obama’s Unsustainable Promise

We have begun to see the effects of the spending boondoggle that this Administration is creating. Bloomberg reports today that the dollar has fallen to a 4 month low against the euro and shows no signs of a rebound. The weakening dollar is indicative of the falling confidence investors have in the U.S. economy due to the massive amounts of U.S. government debt being issued to finance a liberal agenda and a Federal Reserve that is printing money like its going out of style. The effects of these policies could be disastrous.

More evidence of the problems with the massive amount of debt President Obama is burdening us with: The Financial Times reported recently that investor demand for Treasuries has reached such a low at the latest Treasury auction that the yield differential between mortgage-backed and U.S. Treasury debt fell to its lowest level since 1992, spurred by the sharp rise in U.S. Treasury yields (yield moves in the opposite direction of demand.) As this, the so-called “riskless” rate rises, companies will be forced to offer even larger yields on their corporate debt. As the financing for projects becomes more expensive, companies by and large will postpone or abandon their investments. The sheer volume of Treasury debt will lead to a “crowding out” effect, taking away investors who would normally invest in private enterprise, the effect of which will make access to capital markets more and more difficult for busineses that rely on this capital to continue their operations. With demand for U.S. debt already falling to historically low levels what will we do when demand for our debt continues to drop even more? The government has not even begun to spend most of the stimulus money yet. How long will investors and foreign governments continue to finance our bad decisions?

When that well runs dry, there is only one place left to get the money to finance President Obama’s mistakes: your pocket and mine.

"I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes….you will not see any of your taxes increase one single dime." This is a statement from candidate Obama on September 12, 2008.

This promise will prove, and it some cases has already proven, unsustainable. California has all but given us a window into the future this week, as Carol Platt Liebau discusses. Public policy and special interests have spent California into a wall. They now face one of the direst economic and fiscal disasters in history. Ms. Liebau is prophetic: our federal government is heading down the same set of tracks unless we derail this runaway spending train.

The President’s excuses are wearing thin. Laden with a massive deficit from the previous administration, he continues to blame his predecessor. I will be the first to criticize President Bush’s fiscal irresponsibility as well. Make no mistake though: the time for talking about the past and campaigning against Bush is over. It is time to take ownership. The budget deficit for FY 2009 will be larger than the entire budget for FY 2001. That is undeniably the work of Mr. Obama and his liberal Congress. Think about that for a second – the amount that we are spending exceeds the amount we are taking in by the size of the entire federal budget only eight years ago. The enormity of President Obama’s irresponsibility is dumbfounding. The fiscal deficit he was left with may mean that he must make tough choices – it means we cannot buy everything we want. The debt that he inherited demands a heightened sense of fiscal responsibility; one that he has been demonstrably unwilling to provide. This must be stopped before it gets any worse. My fear, however, is that it is already too late.