The Dow is up over 330 this morning. Paulson just finished his presser announcing that the Mother-Of-All-Bailouts (MOAB, in case any end-timers want to find some biblical significance in the meltdown) will cost hundreds of billions of taxpayer dollars. They’ve already taken steps to guaranteed money market funds and have banned short-selling on 799 financial stocks.
So, what does this mean?
Somebody is going to raise taxes. Since spending cuts are out-of-the-question and Paulson and Bernanke (is Bush even in the room as these decisions are made?) have committed the U.S. to hundreds of billions in new spending, where is the money going to come from?
We’ll borrow plenty, of course. Don’t you worry about that. But with all of our obligations (see previous posts here) and the still outstanding financial disaster of Iraq adding more to the total of that vast Treasury IOU written in Chinese, there are going to be some out-of-pocket expenses.
For one thing, borrowing is what got us into trouble in the first place. In a sense, if we borrow more to pay off debt we’re just robbing Peter to pay Paul. But, beyond that, Americans have to start footing their own bills. We cannot live on debt forever. Sooner or later, this economic catastrophe will unfold on a scale that could destroy this country (it may still). We’ve got to get a sense of proportion and responsibility back.
Debt, after all, is a four letter word.
So, despite whatever Obama and McCain say, taxes are going up. Obama’s plan is much more realistic than McCain’s – the Bush tax cuts are gone – but either way, there are going to be big compromises ahead. And we are in for a very rough road (today’s stock market overreaction notwithstanding).
Here is a nice piece from Ann Woolner on Bloomberg about what we should do with all the executives who caused this nightmare. The short version: Hang ’em high. However, the single man most responsible for this mess…Bush. The trillion dollars (and counting) wasted in Iraq alone (and the borrowed money for the tax cuts) will be shown to have had a direct impact on this crisis. History will make note.