In a speech Monday in Toledo, Ohio, Barack Obama fell back on the classic populist political formula and began promising his enthusiastic audience absolutely anything if they would vote him into office. His promises went well beyond the traditional chicken in every pot and car in every garage rhetoric of his predecessors. His philosophy seems to boil down to bailouts for everyone. Bailout upon bailout upon bailout, including subsidies, loan guarantees, direct government loans and public aid for every individual, family and small business in America from the bottom to the top, all at a cost which cannot possibly be counted at much less than a trillion dollars. He wants money for a million makework jobs, for even more loans for the failing auto industry, bailouts for small businesses, for state and for local governments.
What Obama did not go into in detail in this speech was where he was planning to find the money to responsibly pay off our already expensive bailout of homeowners and lenders, much less follow it up with even more free money from the government. There are only a few ways for the government to get money on this scale. It can raise taxes, it can cut entitlements, it can borrow the money, or it can have the federal reserve just print more of it out of thin air. Clearly Obama hasn't thought through the implications of his promises, and those who are considering voting for him have obviously not thought much about what his promises will mean for them in the long run.
Just printing more money is clearly out as a way of funding more public bailouts. That's one of the big mistakes which got us where we are today. It devalues the currency, and every devaluation of the currency multiplies the negative impact of every other negative force in the economy. It creates inflation and takes spending value directly out of the pockets of consumers. Obama can't borrow more money, because international banks and foreign governments are having problems of their own and certainly can't afford to carry more potentially worthless American paper. Cutting entitlements drastically might indeed be able to raise over a trillion dollars quickly, but I don't see a democratic socialist like Obama completely eliminating Medicaid, Medicare and Social Security. If anything, he's likely to expand those programs. Just cutting the discretionary budget couldn't provide anywhere near the money Obama's proposals would require.