The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Obama – “US out of money”

Posted by WARREN MOSLER on May 26th, 2009

After a fiscal package that may or may not be sufficient to bring down unemployment, the president is now directly telling us that the next move is to dampen aggregate demand by reducing health care spending (and letting tax rates go higher.)

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: “We are out of money.”

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.

So we’ve got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it’s putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don’t reduce long-term health care inflation substantially, we can’t get control of the deficit.


[top]

3 Responses to “Obama – “US out of money””

  1. Mike S Says:

    Hey – when you have 100 years of flawed logic from the experts, you get highly intelligent non-experts spouting their nonsense for them!

    Also I actually agree with the idea that we need to get costs under control for medicade and medicare. It is necessary to be able to precisely control how much deficit spending we are providing at any time. With costs like these spiraling, we may not have that option.

    That said, worrying about a problem that appears to be monetary and not environment destroying and 40-50 years in the future is stupid.

    Reply

  2. knapp Says:

    Textbook neoclassical agenda (ala Krugman) in which short run liquidity trap focus succumbs to long-run loanable funds mindset, thus use aggressive fiscal stimulus during a crisis, then revert to “sound finance” in order to fund your social agenda, in this case health care reform.

    From Peter Orszag’s blog back in Nov 2008:
    “Many observers have noted that addressing the problems in financial markets and the risks to the economy may displace health care reform on the policy agenda…Although it may not seem immediately relevant given our current difficulties, it will be crucial to address the nation’s looming fiscal gap — which is driven primarily by rising health care costs — as the economy eventually recovers from this current downturn. Indeed, our ability to address our current economic difficulties (through both financial market interventions and potential additional fiscal stimulus) would be severely impaired if investors were not so willing to invest substantial sums in Treasury securities without charging much higher interest rates. That willingness reflects the (currently accurate) view among investors that Treasury securities are extremely safe investments. “

    Reply

  3. warren mosler Says:

    as if we can’t ‘afford’ to care for ourselves when we have 10 million unemployed looking for work

    time for a change!

    Reply

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>