Wednesday, June 03, 2009

You have to prove it

Megan writes:
Our domestic savings rate is much smaller than our budget deficit, and no one's going to rush to buy a "Liberty Bond" to bail out GM. Yields on longer-term debt have been rising over the last month, and credit ratings agencies have stepped up the pace of their warnings about America's AAA credit rating. If interest rates get too high, the current deficits are going to crowd out more and more actual spending.

Democrats have largely been treating debt and spending as if they were largely a political problem. What will the taxpayers tolerate? Quite a lot, it turns out, in time of crisis. And so Democrats seem to have settled on a strategy of passing as much spending as they can now, while the American public is still reeling from debt sticker shock, and figuring out how to actually pay for it later.

Roosevelt could do this because people felt that America faced an actual existential threat. But that urgency rarely, maybe never, exists outside of total war. Obama needs to please the bond market, as well as the taxpayers. And the bond market is more educated and attentive than the average voter. You can't just tell them that you're going to achieve fabulous cost savings through health care IT.

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