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As those who know me best, realize, I have been preaching about a housing meltdown, and the problems it will cause, for a couple of years now. You may also have realized I am not a big fan of George Bush. What I am gonna do here, in the next few posts, is tie the two together. In my humble opinion, nothing fuels the American economy like housing. From raw materials and labor in all forms to build it, the service industry to market, sell and finance it, the huge amount of manufacturing it takes to furnish the finished house, and the taxation upon it to finance local government and education, and it is unparalleled in it's scope. Throw in the American dream of home ownership and the fact that it is most people's largest investment and you can began to see the importance. In a normal economic environment, this investment grows through inflation and the gradual payment on principal. It acts like a piggybank for larger purchases and emergencies by refinancing when necessary. All in all, it is the bedrock of society as we know it. However, whenever there is a source of wealth and income like this, there are those who would seek to profit, at all costs. That is why we need regulations in place, at all stages, to protect the process and our largest investment. Before the Bush administration, we had that....
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With Continuing talk of taxes, the federal budget, and a reeling ecomomy in the air, the notion that Washington's fiscal house could be put right if only officials had the stomach for real spending cuts has become a stubborn article of faith.
Prez Bush's $3.1 trillion budget plan for 2009 anticipates $407 billion in red ink. Add to that $193 billion that he would borrow from SS for other uses, and the amt. added to the $9.4 trillion national debt will swell to $600 billion. So, why not simply cut spending to drain that ocean of red ink? Let's go to the numbers.
Washington faces mandatory spending of $1.6 trillion in 2009, mostly, Medicare, and Medicaid. Then there's $260 billion in interest on the national debt to be paid, the fastest growing segment of the budget.
The next big chunk is $730 billion for defense. There is surely some fat in that, but the notion of big cuts in military spending when the nation is on a war footing is a nonstarter.
What's left? Mainly nonsecurity domestic spending, for which, Mr. B. budgeted $482 billion. That's the tab for everything else Washington does, including such things as environmental protection, schools, regulating food and drugs, medical research, the FBI, disease control, transportation, homeland security, courts, veterans, and the IRS.
You could wipe out all that domestic spending-largely end government as we know it- and Washington would still be in the red. Strong economic growth would help. But the nation is sliding toward a recession, if not already there.
The point is, there are no easy answers. Spending cuts and tax increases both have to be a part of any pragmatic discussion about fixing what ails federal finances.