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Because Obama won both the popular and the electoral vote by significant margins, he can probably claim a mandate. However, the economic realities of the American economy will make it very difficult for him to fulfill many of his promises. There is no greater evidence of such a constraint than the national debt. For example, the Treasury Department will tap financial markets for $550 billion in the final three months of 2008 and another $368 billion in the first three months of 2009. Economists predict that the total borrowing by the federal movement during the current fiscal year, which ends 30 September 2009, could surpass $1.5 trillion!! In other words, the US national debt will have increased by 25% in one year. Given this reality, it could be very difficult for Obama to pursue additional spending or tax cuts, both of which he promised to do.
Why is the debt growing so astronomically? Obviously, the recession has slowed individual income and corporate income tax receipts. Outlays are rising for unemployment insurance, food stamps, and other such programs. Further, the US government is embarking on a $700 billion program to purchase distressed assets from Wall Street and invest in financial firms—all requiring the use of borrowed money. In addition, Congress will no doubt pass a new stimulus package that could exceed $150 billion. That money will come from borrowed funds.
That this is troublesome is a given. What is even more of a concern for the near future is that Medicare, Medicaid and Social Security will all face significant shortfalls. As the population continues to age, all three programs will face huge deficits. Where will the government get that money? In short, it is difficult to be optimistic about the near- or long-term future of the American economy. Even more important for now is what Barack Obama wants to do in terms of health care, an alternative energy policy and his ambitious tax cut agenda. No one can realistically see how he can pay for all these with the deficit accelerating so quickly. This is part of the immense challenge Obama will face as he assumes office in January 2009. Perhaps he should look all of us in the eye and say, “I am going to need your help. We are entering a period of time when we will all need to sacrifice. Things cannot remain the same. We cannot continue to do things the way we have always done them. That is part of the ‘change’ I have been talking about. I am calling on all of us to sacrifice for the common good.” In my opinion, he needs to talk straight to the American people. We will see if he has the courage to do just that.
See Jon Hilsenrath’s very helpful article in the Wall Street Journal (6 November 2008). |
