The American people didn’t much care last Tuesday, but Mark Steyn lays it out again: the Obama administration spent $5.60 for every $1 of economic growth.
Anyone who thinks that government spending stimulates the economy ought to take notice.
Steyn adds another important point, one that few care about, namely, that for the government to function it needs to sell its debt at very low interest rates. That means the world entire must maintain a ravenous appetite for our debt. If not, bond prices will fall, interest rates will rise and the government will be spending unconscionable amounts of money just to service the debt.
So, Steyn asks, who is buying up all of our debt? Why, it’s our very own Federal Reserve. He reminds us that the Fed buys 70% of our debt.
Where does it get the money? Could it be that it is printing it?
Clearly, this means that the market for government bonds is anything but free. It also means that the government is running on fumes.
In Steyn’s words:
In the course of his first term, Obama increased the federal debt by just shy of $6 trillion and, in return, grew the economy by $905 billion. So, as Lance Roberts at Street Talk Live pointed out, in order to generate every $1 of economic growth the United States had to borrow about $5.60. There's no one out there on the planet – whether it's "the rich" or the Chinese – who can afford to carry on bankrolling that rate of return. According to one CBO analysis, US government spending is sustainable as long as the rest of the world is prepared to sink 19 percent of its GDP into U.S. Treasury debt. We already know the answer to that: In order to avoid the public humiliation of a failed bond auction, the U.S. Treasury sells 70 percent of the debt it issues to the Federal Reserve – which is to say the left hand of the U.S. government is borrowing money from the right hand of the U.S. government. It's government as a Nigerian email scam, with Ben Bernanke playing the role of the dictator's widow with $4 trillion under her bed that she's willing to wire to Timmy Geithner as soon as he sends her his bank account details.