There's some worried speculation at the top that the current crisis may have
made it harder, not easier, to effect the centrepiece of spending
utbacks - greatly expanded private investment accounts as a quid pro quo
for shrinking the social security account, representing a real windfall for
Wall Street. Public confidence in the markets and the stability of the
financial system have been shaken to the point people will not as willingly
entrust their retirement savings to their brokers. More surreptitious
changes to the retirement age, payroll deduction levels, and benefits would
be easier to implement, but only if the current angry popular mood subsides,
and that will depend on events.
====================================
----- Original Message -----
From: "ken hanly" <[EMAIL PROTECTED]>
To: "Progressive Economics" <[email protected]>
Sent: Friday, September 26, 2008 2:29 PM
Subject: Re: [Pen-l] Obama: bailout will force social spending cutbacks
Seems to me that Old Uncle Miltie Friedman said that deficits could be a
good thing since they force cuts in social spending.
Maybe he would approve the bailout on those grounds!
Cheers, k hanly
Blog: http://kenthink7.blogspot.com/index.html
Blog: http://kencan7.blogspot.com/index.html
--- On Thu, 9/25/08, Louis Proyect <[EMAIL PROTECTED]> wrote:
From: Louis Proyect <[EMAIL PROTECTED]>
Subject: [Pen-l] Obama: bailout will force social spending cutbacks
To: "PEN-L list" <[email protected]>
Date: Thursday, September 25, 2008, 9:57 AM
http://www.ft.com/cms/s/0/0a4fefee-89d2-11dd-8371-0000779fd18c.html
Obama concedes delay in plans
By Andrew Ward in Detroit and Daniel Dombey in Washington
Barack Obama acknowledged for the first time yesterday that
the
financial crisis could force him to rein in his ambitious
spending plans
as the proposed $700bn bail-out of Wall Street threatens to
plunge the
government deeper into debt.
The Democratic presidential candidate hoped that much of
the public
money committed to the financial sector would be recovered,
but said it
was likely some of his spending plans would be delayed.
"Does that mean I can do everything that I've
called for in this
campaign right away? Probably not," he told NBC's
Today programme. "I
think we're going to have to phase it in."
His remarks reflected a growing realisation that the
financial crisis -
and the government's costly resp-onse to it - had
transformed the fiscal
landscape for the next president and thrown both
candidates' economic
programmes into doubt.
The US was facing a record $480bn (€327bn, £259bn)
budget deficit next
year even before recent events, and the proposed bail-out
threatens to
push it to more than $1,000bn.
Both candidates would be constrained by the crisis. Mr
Obama wants to
commit an additional $130bn a year to an array of new
federal programmes
while cutting taxes on the middle classes by $80bn. The
shopping list
includes $65bn on healthcare, $18bn on education and $15bn
on green
energy initiatives.
John McCain, his Republican opponent, plans a sharp cut in
corporate
taxes that could reduce federal revenues by up to $300bn a
year.
In later comments at an event in Florida, the Democratic
nominee
insisted that "a lot" of his spending plans would
be financed by changes
to the budget elsewhere, arguing that, in times of economic
difficulty,
healthcare improvements and a middle class tax cut were
more important
than ever.
But he added: "It would be irresponsible of me to say
I am not going to
take into account what things look like should I take
office",
highlighting uncertainty over whether the US economy would
recover or
"slide deeper into recession".
Mr Obama plans to help fund his proposals by raising taxes
on people
earning more than $250,000 but he acknowledged this month
that rate
increases might have to wait until the economy had
stabilised.
He said it was still unclear how much the bail-out would
cost taxpayers
and what its impact would be on the budget.
"Although we are potentially providing $700bn in
available money to the
Treasury, we don't anticipate that all that money gets
spent right away
and we don't anticipate that all that money is lost.
How we're going to
structure that in budget terms still has to be
decided," he said.
Opinion polls have so far shown Mr Obama benefiting from
the crisis by
refocusing attention on the struggling economy and failures
of the
Republican administration.
Copyright The Financial Times Limited 2008
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