ONE PRIORITY FOR CONGRESS: TO SPEND, SPEND, SPEND
November 8, 2004
12:55 AM Eastern
On November 3, 2004, a mere one day after winning reelection, it was announced by the Bush administration that in two weeks it will run out of any further 'creative accounting' methods in being able to manage the federal government's massive borrowing. This will necessitate putting even more pressure on Congress to raise the debt ceiling limit, something they refused to do before adjourning in October because hundreds of members were up for reelection.
Next week the Treasury Department will conduct a scheduled series of 'debt auctions' in an attempt to raise $51 billion dollars. While administration officials won't use the words 'fiscal crisis,' Congress is scheduled to return for what's called a 'lame-duck' session on November 16, 2004 to take action on an omnibus spending plan for the rest of the year's budget and the debt ceiling.
Currently, the debt ceiling is $7.384 trillions dollars. That astronomical amount hit October 14, 2004 which forced the Treasury Department to engage in creative bookkeeping that will only last through mid-November. (search) The Republican controlled Congress maintains that the current administration's tax cuts are responsible for creating an economic stimulus for the economy, while the Democrats say just the opposite.
According to several economists, the situation is far worse than the American people are being told. In an open letter to President Bush dated October 4, 2004, Francis Aguilar, Professor of Business Administration, Emeritus at Harvard Business School had in part, this to say:
"As professors of economics and business, we are concerned that U.S. economic policy has taken a dangerous turn under your stewardship. Nearly every major economic indicator has deteriorated since you took office in January 2001. Real GDP growth during your term is the lowest of any presidential term in recent memory. Total non-farm employment has contracted and the unemployment rate has increased. Bankruptcies are up sharply, as is our dependence on foreign capital to finance an exploding current account deficit. All three major stock indexes are lower now than at the time of your inauguration. The percentage of Americans in poverty has increased, real median income has declined, and income inequality has grown....
"Sensible and farsighted economic management requires true discipline, compassion, and courage – not just slogans. Given the tenuous state of the American economy, we believe that the time for an honest assessment of the problem and for genuine corrective action is now. Ignoring the fiscal crisis that has taken hold during your presidency may seem politically appealing in the short run, but we fear it could ultimately prove disastrous. From a policy standpoint, the clear message is that more of the same won’t work. The warning signs are already visible, and it is incumbent upon all of us to pay attention."
This "open letter" was also signed by several others with the note that these individuals in their individual capacities and that the letter represents personal views and not those the institutions with which they are affiliated. The following are a small sample of the100 signatories: Ramon J. Aldag, School of Business, University of Wisconsin-Madison; Teresa M. Amabile, Edsel Bryant Ford Professor of Business Administration, Harvard Business School; Kenneth R. Andrews, David K. Donald Professor of Business Administration, Emeritus, Harvard Business School; James E. Austin, Eliot I. Snider and Family Professor of Business Administration, Harvard Business School; Joseph L. Badaracco, John Shad Professor of Business Ethics, Harvard Business School; Lotte Bailyn, T. Wilson (1953) Professor of Management, MIT Sloan School of Management; George P. Baker, Herman C. Krannert Professor of Business Administration, Harvard Business School; Louis B. Barnes, John D. Black Professor, Emeritus, Harvard Business School; James N. Baron, Walter Kenneth Kilpatrick Professor of Organizational Behavior and Human Resources, Graduate School of Business, Stanford University; Thomas A. Bausch, Professor, College of Business Administration, Marquette University; Cynthia Beath, Professor Emeritus, McCombs School of Business, University of Texas at Austin; Jack N. Behrman, Luther Hodges Distinguished Professor, Emeritus, Kenan-Flagler Business School, University of North Carolina; Robert B. Bostrom, L. Edmund Rast Professor of Business, University of Georgia
Last month, America's Comproller General, David Walker's alarming 'briefing paper' demonstrates that the federal government's budget will grow to such bloated heights, spending will reach almost half the economy's total output by the year 2040. Currently federal spending is a whopping 20% of America's GNP. Since there is no money in the U.S. Treasury, this means Congress will have to continue borrowing from the privately owned Federal Reserve Banking system. This massive debt will be passed on from generation to generation with no hope of ever paying it down.
Walker stated in his paper regarding this fiscal deterioration that neither Bush nor Kerry even remotely touched on the looming fiscal disaster with both promising to cut the deficit in half by 2008 before the real "fiscal bomb" explodes. A mathematical impossibility. Walker was no doubt referring to the massive explosion of federal spending that will be needed to meet the needs of the retiring 'baby boomers' in four short years. (search)
The most ominous prediction by Walker who heads up the GAO (Government Accountability Office) is that this ticking time bomb means that taxes would need to be raised by 250% along with drastic cuts in government programs. Walker also stated that due to this enormous debt, America could experience the same type of economic problems as some Third World countries.
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Currently, the debt ceiling is $7.384 trillions dollars. That astronomical amount hit October 14, 2004 which forced the Treasury Department to engage in creative bookkeeping that will only last through mid-November.