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Default Obama-Bush Making U.S. A Socialist Republic

Obama-Bush Making U.S. A Socialist Republic

By Patrick J. Buchanan

"Barack Obama and George W. Bush seem to have come away from their study

of the Great Depression with similar conclusions:

To wit: After the Crash of 1929, the Federal Reserve did not move fast
enough to save the banks and inject cash into the economy. Second, the New
Deal, far from being wastrel deficit spending, was not bold enough. So it
was that America wallowed in depression for a decade until the unbridled
spending and mammoth deficits of World War II pulled us out.

Bush and Obama seem determined not to make the same mistake.

We are all Keynesians now.

Thus, we have the $700 billion Bush bank bailout, the $700 billion
"stimulus package" Obama wants by inauguration to "jolt this economy back
into shape" and the $800 billion fund Hank Paulson created to get
consumers borrowing and buying again.

These come on top of Bush $455 billion deficit, the $29 billion bailout of
Bear Stearns, the $105 billion in pork to grease the $700 billion bailout,
the $100 billion to $200 billion to keep Fannie and Freddie afloat, the
$140-billion-and-counting for AIG, the $25 billion for the greening of GM,
Ford and Chrysler, the $25 billion more to save the Big Three and the $20
billion for CitiGroup.

Now much of this overlaps, and some will be retrieved. But we are still
staring at a deficit that could approach $2 trillion.

How would this stack up historically?

A deficit of $1.4 trillion would be 10 percent of gross domestic product,
dwarfing the postwar record 6 percent run by Ronald Reagan in the Jimmy
Carter recession.

Bewailing the "Reagan deficits" has been a staple of Democratic oratory.
This will stop. But the politics of this is not the point, the policy is.

Consider what we are about to do. Bush in 2008 spent 21 percent of GDP.
States, counties and cities spent another 12 percent. Thus, one third of
GDP is spent by government at all levels. Obama and Co. propose to raise
that by another 10 percent of GDP. We may soon be north of 40 percent of
gross domestic product controlled and spent by government.

That is Eurosocialism.

And where, exactly, are we going to get the money?

Americans save nothing. We spend more than we earn. Thus the levels of
consumer debt, credit card debt, auto debt and mortgage debt. U.S.
foreign-exchange reserves amount to a piddling $73 billion.

The only nation with the kind of cash on hand we need now€”if we don't
print the money and invite another gigantic bubble€”is China, with its $2
trillion in foreign-exchange reserves.

Will Beijing lend back the dollars it has piled up by selling to us?

China certainly has an incentive to keep Americans spending. For our
purchases of Chinese-made goods have often been responsible for 100
percent of China's growth. China does not want to kill the American goose
that lays those golden eggs€”until the goose can't lay any more eggs.
Then they won't need the goose.

But should China decide to lend us the money, what will Beijing demand in
interest rates and assurances that we will not default. After all, the
U.S. debt is 70 percent of GDP, our savings rate is near zero, and our
merchandise trade deficit is still running at 5 percent to 6 percent of
GDP.

Unlike the 1950s, we are today dependent on foreigners for two-thirds of
our oil and for much of our manufactured goods€”toys, TVs, radios,
cameras, cars, shoes, clothes, bikes, motorcycles€”and for the $700
billion to $800 billion we borrow each year to pay for these imports.

With U.S. homeowners, consumers, companies and banks now going bust, why
must the nation borrow trillions more to bail them out? So we can maintain
our status and standard of living as the last superpower.

Bush and Obama are competing to shovel out trillions of dollars, so we can
return to the good times of yesterday.

But wasn't yesterday the root cause of today? Didn't saving nothing and
spending more than we earn, purchasing what we cannot afford in cars,
consumer goods and houses, buying far more from abroad than we sell
abroad€”didn't that cause this crisis and crash?

A family man in America's condition, awash in debt, spending more than he
makes, would cut back consumption, find a second job and get out of debt.
Or declare bankruptcy, accept the shame and humiliation, change his
wastrel ways and start anew.

Is it different for a nation?

Yet we seem to believe we can borrow and spend our way out of a swamp of
unpayable debt into which borrowing and spending have plunged us.

We are headed either for default on our debts and bankruptcy as a nation,
or something less honorable: a quiet cheapening of the debts we have
incurred by inflating and destroying the dollar, robbing our creditors of
what we owe them and robbing our own people of the value of what they have
earned. And so it has come to this.

What would the Founding Fathers think of us now?"

http://www.vdare.com/buchanan/081127_socialist.htm

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