Some Thoughts on the Economy (News) (Commentary)

The current economic problems that the US is facing all have pretty much the same source, I would argue - everyone, including the government, has over borrowed. Believing the US economy to be indestructible, mortgage companies and banks loaned money to people they had no right loaning money to. The US Government, in order to pay for the Iraq war and George Bush's tax cuts, has borrowed until the government's eyes are bleeding.

All of that borrowing is coming home to roost. The value of the dollar around the world is dropping like a lead balloon - nobody wants our dollars anymore - they would much prefer to be paid in Euros. This is causing the spike in gas prices. At home, lenders aren't collecting on the poor loans they offered and their liquidity is drying up. People are over-leveraged and have no cash to spend. And now we're going to borrow another $150 billion to pay for an economic stimulus package that will probably do nothing more than encourage people to borrow even more.

This is not going to be an easy recession.

And the cause of it all are the policies of President George W. Bush.

In my not so humble opinion, what we need to do right now is to bite the bullet, accept the recession it will exacerbate, and get the damn federal budget balanced. Today. Raise taxes. Cut spending. Begin bringing the troops home from Iraq. This will hurt for a while - it will increase the pain of the recession. But if we don't get a handle on this, and soon, we will pay for it for decades to come.

The following is from The Guardian...

In 2005, a Nobel prize-winning economist began the painstaking process of calculating the true cost of the Iraq war. In his new book, he reveals how short-sighted budget decisions, cover-ups and a war fought in bad faith will affect us all for decades to come. Aida Edemariam meets Joseph Stiglitz...

Some time in 2005, Stiglitz and Linda Bilmes, who also served as an economic adviser under Clinton, noted that the official Congressional Budget Office estimate for the cost of the war so far was of the order of $500bn. The figure was so low, they didn't believe it, and decided to investigate. The paper they wrote together, and published in January 2006, revised the figure sharply upwards, to between $1 and $2 trillion. Even that, Stiglitz says now, was deliberately conservative: "We didn't want to sound outlandish."

So what did the Republicans say? "They had two reactions," Stiglitz says wearily. "One was Bush saying, 'We don't go to war on the calculations of green eye-shaded accountants or economists.' And our response was, 'No, you don't decide to fight a response to Pearl Harbour on the basis of that, but when there's a war of choice, you at least use it to make sure your timing is right, that you've done the preparation. And you really ought to do the calculations to see if there are alternative ways that are more effective at getting your objectives. The second criticism - which we admit - was that we only look at the costs, not the benefits. Now, we couldn't see any benefits. From our point of view we weren't sure what those were."