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blessedinnyc -> RE: Obama's Energy Policy (8/2/2008 8:32:07 PM)
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ORIGINAL: inthysite
And before you say that the debt is used to fund Bush's war, remember that Congress voted for the war, so it's expenses were approved. When we needed more money to fund the troops, once again, Congress approved the funding.
I view the war as a sunk cost, and assuming we're going to cut the cost by 2/3 by 2010 no matter who's president, its merits are largely irrelevant.
However, something relevant is the fact that the only other war in US history that didn't correspond with a tax increase was the Vietnam War. Naturally, it was much more expensive, but how the government handled it was very similar: it borrowed, borrowed, borrowed, and inflated the currency at the same time.
All I'm saying is that government spending- at least when it comes to war (or anything that we would be hard-pressed to call an investment)- is a zero-sum game. If it isn't funded by tax increases or spending cuts, we will pay for it with either higher taxes or inflation in the future.
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And as the article linked to above notes, there are other things that attribute to our debt and thus selling more treasury notes, such as the banking buyouts, the housing buyouts, etc., which, once again, were approved by Congress.
Yes, the feds are participating in a lot of bailouts right now, and I wish they'd cut back on the stuff that doesn't improve the economy's efficiency. (Warren Buffett noted that had the Bear Stearns bailout not gone through, Bear's counterparties would have waited in BK court for several years, and there would have been even more economic uncertainty and inefficiency.) It's a tough call- but ignoring the moral hazard part for a moment, I think a good chunk of the federal government's involvement in the market creates long-term value by letting everyone know what their trades are worth.
And most of the government's "bail-outs" translate into investments. For the record, the feds are buying mortgages at prices that smart wall street folks just two years ago never expected. Ironically, they are doing the same things that many of the traditionally smarter hedge funds are doing. When we exits these trades in a few years, I expect that we could make a profit (assuming the prime mortgage rate increases by less than about 200 basis points.)
One thing, however, that doesn't create long-term value right now is road construction. We could be using the $0.18/gallon federal gas tax to pay down the debt or fund research on the electric car. One might question whether new roads will be used if we need to drive oil-powered cars on them.
So again, the solution to energy prices is very simple:
A recession. (A carefully engineered one would also help us pay down the deficit).
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