Tax cuts, budget deficits, and a falling dollar (Oh my!)

This morning, I heard on NPR that the Japanese and Europeans are so concered with the weak dollar (~$1.30= 1 Euro) that they are thinking of ways to stop the slide of our currency. Why would they do this? Well, our government is not about to do anything, and they depend on a strong dollar to make money from trade with the US. While the weak dollar is good for US trade in the short term, eventually, it will cause foreign governments, who currently lend us billions to finance our national debt, to abandon our currency for something more stable--the Euro--and will lead us into a huge financial crisis of high interest rates and record inflation.

Does this bother anyone else? Our federal goverment is facing one of the largest finacial crises in its history (in the next ten years or so), and we have a president who insists upon trillions of dollars in tax cuts, leads us into a very expensive war (in money and lives, unfortunately), and who refuses to veto a single spending bill that comes out of the Republican controlled Congress?

There was a time in my 20s when I thought that credit cards were a pretty good idea. I was able to live way beyond my means by charging more and more, and making the minimum payments on those cards. This worked for a while, and I got some good Vegas vacations out of it, but eventually, I had to pay the piper. For the past four years, the old US of A is taking up the spending habits of my younger days, and most politicians: A) agree that we're headed for a reckoning when Baby Boomers start collecting Social Security and medicare, and B) that they won't do anything about this issue becasue it would make them unpopular with everyone from seniors (who will almost certainly have to take a benefit cut) and younger workers (who will almost certainly have to pay higher payroll taxes).

Neither presidential candidate wanted to touch this in the debates, becasue there is no good solution (i.e. one where no one has to pay more or earn less), but I did believe Kerry when he talked about his Senate budget cutting resume. Even with a Republican Congress, Clinton and Senate Democrats managed to control spending and create surpluses, even going to extreme measures to prevent unneccessary spending. Remember the "government shutdown" in 1995? That was one of my favorite Clinton moments.

When I was growing up, I remember that the popular conception was that Republicans were fiscally reponsible, wanted to limit spending, and make goverment smaller. Unfortunately for conservatives, this didn't happen under Reagan, Bush I, or Bush II, all of whom ran record budget deficits.

W is, in my view, either crazy, stupid, or just tragically shortsighted. It seems that conservatism now means: cutting taxes for the rich regardless of circumstances, spending like a drunken sailor on any program that benefits the military or big business, and claiming that God told you to.

I have visions of Bush appearing in a popular credit card ad:

Tax cuts : $1.9 Trillion/10 yrs
Iraq War: $148 Billion (and counting)
Increased spending: Over 10% per year
New Medicare Perscription Drug Benefit: $400 billion/10 yrs
Budget Deficit: $521 Billion (2004)
National Debt: $7.5 Trillion (and counting)
Screwing Baby boomers out of their retirement benefits: Inevitible

Now it doesn't take a genius to figure out that without the tax cuts (mostly for the rich), a very costly medicare benefit, an unnecessary war, and unusually high spending, we'd be a little better off, and at least have a chance of keeping the debt under control.

Add to the $7.5 trillion national credit card bill (growing by 1/2 $ trillion per year) the fact that social security benefits will be going through the roof, and I don't know how we'll get out of it without a huge tax increase or reduction in benefits. Even Alan Greenspan , not known for his liberal views, is concerned about deficits enough to make them a central point in his address to Congress this year. The most dire predications I've heard are from Stephen Roach of Morgan Stanley who predicted that we have a 1 in 10 change of avoiding "Economic Armageddon."
He said: (As recounted by the Boston Herald):

To finance its current account deficit with the rest of the world, he said,
America has to import $2.6 billion in cash. Every working day. That is an
amazing 80 percent of the entire world's net savings. Sustainable? Hardly.

To make maters worse, he says that the weak dollar, and larger deficits will force the Federal Reserve to raise interest rates in a desperate attempt to keep inflation low and will cause Americans with unprecedented personal debt to default and declare bankrupcy in record numbers.

Got an adjustible rate mortgage on that house you can barely afford? Thousands of dollars in credit card debt? Guess what? You also own a $25,526.56 share of the national debt, and each member of your family owes an equal amount.

Good luck. You need it, and so does the country.

Tin Foil Out