Right Opinion

Blank-Check Economics

Paul Greenberg · Oct. 21, 2009

How simple it all was to Gabriel Bordenave, 29, one of the many good citizens who turned out to welcome Barack Obama, kind of, to New Orleans last week.

Mr. Bordenave had a simple solution to all the Crescent City’s still formidable problems – and he couldn’t understand why the president of the United States couldn’t see it.

Here his city was still struggling to recover from Katrina and the country’s financial meltdown in general, but Washington just wasn’t coming through, at least not to Gabriel Bordenave’s satisfaction. As he told the president, “I expected as much from the Bush administration, but why are we still being nickel-and-dimed in our recovery?”

The president could only reply, “We are working as hard as we can as quickly as we can. I wish I could write a blank check.”

To which Mr. Bordenave shouted back, “Why not?”

Yes, Mr. President, why not? If the politicians in Washington can double the national debt in only eight years – from $5.7 trillion at the beginning of this decade in 2001 to $11.9 trillion at the end of fiscal 2009 – why can’t this president just sign a blank check and fix everything Katrina wiped out?

And if Medicare and Social Security’s unfunded liabilities can top $70 trillion (that’s the estimate from Richard Fisher, chairman of the Dallas Federal Reserve) why not just write a blank check for New Orleans, too?

Hasn’t the Congressional Budget Office just reported that the annual federal deficit has reached a record $1.4 trillion – that’s trillion with a T – for fiscal 2009? That’s 9.9 percent of the nation’s GDP, or almost a tenth of the total value of all the goods and services this country produces a year.

So how come the president can’t just sign a blank check and fix everything in post-Katrina, post-Rita, still recession-struck New Orleans? Or as Gabriel Bordenave asked the president, “Why not?”

The president’s response, if any, was not reported. If he did want to answer/educate Mr. Bordenave, where would he start? Or finish? How teach a course in Economics 101 right there and then?

Welcome, Mr. President, to the economic expectations of entirely too many Americans, who think your job is as simple as signing a blank check. How do you suppose so many of us could have got that idea? Surely it wasn’t the tone of your own Spread-the-Wealth campaign promises that encouraged such delusions.

Even this president, who’s no stranger to spending money here, there and everywhere, and is about to spend still more on the nation’s health care, or at least on its health insurance with far from certain results, knows there is a limit to what even America can spend without inviting the direst consequences. For the inflation that is the surest result of blank-check economics can be the cruelest tax, driving up prices and weighing heaviest on those least able to pay.

Governors know they have to balance revenue and expenditures, at least in states like Arkansas that require balanced budgets, and now the president, too, is beginning to learn there’s no blank check he can sign and solve all the nation’s fiscal problems. Any more than there’s a free lunch, as much as the Gabriel Bordenaves of the world think there is. And there are an awful lot of them. They seem happily innocent of what happens when a president keeps signing blank checks, and a government keeps printing paper money to pay its rapidly accumulating debt rather than balance its budget.

What happens is that the nation’s currency is devaluated. See the short, unhappy history of Weimar Germany, a case history of inflation gone wild. See what’s happening to the value of the U.S. dollar even now, and the worried sounds coming from those who hold huge amounts of them in bonded debt, like Communist China’s leaders, who can be the savviest of capitalists when they hold American securities.

But the president of the United States is a busy man. He can scarcely be expected to explain all this in a 30-second street-corner lecture on the dangers of inflation – even if he were fully aware of them. Maybe he should have just handed his heckler in New Orleans a copy of Henry Hazlitt’s classic little guide, “Economics in One Lesson.” And suggested his questioner start with Chapter XXII, “The Mirage of Inflation.”


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