CHESSNOID

The new stimulus package by the Obama administration will certainly pass.  There is a Democrat majority in the House and Senate as there has been for the past 2 years.  They passed the previous bailout bills and stimulus packages when Bush was president.  We can see most of the money went to waste and definitely did not accomplish their goals! All we have to show for the money spent in the last year bailing out companies and writing out rebate checks is a few more trillion dollars in the federal deficit.

The economy is in worse shape now than a year ago and those previous actions have actually made the recession become more severe.  As we pass this new spending package, our global neighbors watch not to see if it will work but to see how we actually pay for it.

NY Times: Global Worries Over U.S. Stimulus Spending

“Even before Obama walked through the White House door, there were plans for $1 trillion of new debt,” said Niall Ferguson, a Harvard historian who has studied borrowing and its impact on national power. He now estimates that some $2.2 trillion in new government debt will be issued this year, assuming the stimulus plan is approved.

“You either crowd out other borrowers or you print money,” Mr. Ferguson added. “There is no way you can have $2.2 trillion in borrowing without influencing interest rates or inflation in the long-term.”

Mr. Ferguson was particularly struck by the new borrowing because the roots of the current crisis lay in an excess of American debt at all levels, from homeowners to Wall Street banks.

“This is a crisis of excessive debt, which reached 355 percent of American gross domestic product,” he said. “It cannot be solved with more debt.”

While Mr. Ferguson is a skeptic of the Keynesian thinking behind President Obama’s plan — rather than borrowing and spending to stimulate the economy, he favors corporate tax cuts — even supporters of the plan like Mr. Zedillo and Stephen Roach of Morgan Stanley have called on the White House to quickly address how it will pay for the spending in the long-term.

“It’s huge,” Mr. Roach, the chairman of Morgan Stanley Asia, said. “President Obama has now laid out a scenario of multiyear, trillion-dollar deficits.”

The stimulus is widely expected to pass, but once it does, Mr. Roach said the focus would shift to “who foots the bill and what is the exit strategy. We don’t have the answer to either question.”

Mr. Zedillo, who remembers how Mexico was forced to tighten its belt when it received billions from Washington to keep its economy from collapsing in 1994, was even more blunt.

“People are not stupid,” Mr. Zedillo said. “They see the huge deficit, the huge spending, and wonder what comes next.”

I believe the current actions now coupled with the sure-to-come bigger bailouts and bigger stimulus package will trigger the age of the Bush-Obama Depression. With all the actions Bush, Bernanke, and Paulson did last term with large deficit spending and maintaining articificially low interest rates, it made the recession more severe. Watching Obama and Geithner (even with their good intentions) get their trillion dollar rescue package approved for more deficit spending naturally leads me to believe the worse is yet to come . This severe recession will no doubt become a depression.