Living on borrowed money

Economic signs aren’t good. The Federal Reserve has begun muting its expectations for growth and inflation in the near future. Second quarter growth is being pegged at just over 2 percent, down from the 3 to 3.5 percent the experts previously thought. Unemployment isn’t budging. (Read about it here.)

It will be interesting to see what Congress and the president feel they have to do next. Gigantic stimulus spending bills obviously haven’t helped. Will they want to spend even more?
If so, they should remember what the co-chairmen of the president’s debt commission said a few days ago. The nation’s mounting debt, “Is like a cancer,” said co-chair and Democrat Erskine Bowles.”It is truly going to destroy the country from within.”
He noted that Medicare, Medicaid and Social Security now consume all the nation’s tax revenues. Everything else, including the wars, federal education spending, homeland security, etc., is being paid for on borrowed funds, to a large extent borrowed from the Chinese.
Meanwhile, the Chinese are starting to worry, as this blog makes clear.
My take? Deficit spending can be prudent during times of recession, but when the nation has been running up annual deficits for much of several decades, it can push the economy into a whole different level of peril. This issue is moving out of the realm of political opinion. Smart people of all political parties are sounding alarm bells. I just don’t think the ones who count — the elected officials in Washington — are going to make the agonizing decisions that are necessary.
What do you think?
(Note: I am going on vacation for awhile. Expect more blog posts when I return.)