25 June 2010

Obama Administration Cynically Willing To Spend Until We Are Broke

Telegraph (UK): Barack Obama is refusing to listen to reason on economic policy
President Barack Obama, backed to some extent by Nicolas Sarkozy of France, wants economic stimulus to continue until the global recovery is unambiguously secure. In the opposite corner is Germany's Angela Merkel, now oddly aligned with Britain's new political leadership in thinking the time is right for fiscal austerity.

Like much of what Mr Obama says and does these days, the US position is cynically political. With mid-term elections looming and the Democrats down in the polls, the administration hasn't yet even begun to think about deficit reduction. Obama is much more worried by the possibility of a double-dip recession and the damage this would do to his chances of a second term, than the state of the public finances.

As it happens, the public debt trajectory is rather worse in the US than it is in Europe, yet Obama has adopted an overtly "spend until we are broke" approach in a calculated bid for growth and votes.

In berating others to carry on spending, Mr Obama is being neither politically wise nor economically sound. He should instead be attending to his own back yard by mapping out some sort of credible, long-term plan for returning the US to balanced budgets. The US is still dangerously reliant on Chinese funding for its deficit spending. It's not going to last indefinitely, and with rising domestic demand in China, may already be on the wane.

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