A Modest Deficit Proposal

Deficits are a melancholy object to those who walk through this great town or travel in the country, when they see the streets, the roads, the cabin doors, covered in “Foreclosure” signs, followed by bailed-out bankers and incumbent Senators, begging every lowly taxpayer for alms.

Thus, we present a modest proposal: The American worker and investor has done so poorly over the last 10 years not because of easy money and rabid government spending…but because there actually wasn’t enough of either.

We propose the following…then the country will be great again, like in 1999:

  • Reduce interest rates to -2%. Money will no longer be free – the Fed will actually pay banks to borrow money. That way, they’ll lend to you for free, and you can turn around and use that free money to do the sorts of things any American would do with some extra cash…like pay down debts, start a small business or open a Roth IRA.
  • Quadruple government stimulus. Paul Krugman is definitely wrong…it’ll take a lot more than just doubling down to fix this mess. We reckon $5 trillion will “get this economy back on track.” With that much money, we could build a high-speed rail from Baltimore to Juneau, get every 50-plus man two Viagras a day and have all American homes government owned…ensuring there will never be a subprime crisis again.
  • Expand Medicare and Social Security exponentially. Mandatory retirement at 45. Complimentary liposuction at 50. Remember, when the funds run out of money in 2011, we can borrow from the Fed at a profit…interest rates are at -2%.

And if by some unlikely fortune, the Fed prints too much money…once we are all millionaire yacht owners…our dollars will have other purposes, too. The USD is, after all, made of cotton and linen. With enough crisp bills, the enterprising tailor could fashion himself a fine pair of pants. More leftovers, as this wealthy housewife illustrates with her beloved Deutsche marks, could be used to keep the family warm in wintertime.

Deutsche Marks

“Unless we as a nation demonstrate a strong commitment to fiscal responsibility,” Ben Bernanke (of all people) said late last week, “in the longer run, we will have neither financial stability nor healthy economic growth.”

Turning over a new leaf himself, Bernanke warned the Center for the Study of the Presidency and Congress of some “difficult choices” coming soon. Boy, this guy is OUT THERE…

“To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense or some combination of the above.”

No, no, no… This is not the Ben Bernanke we know and trust. What happened to the guy who wanted to dump money from helicopters into the waiting arms of consumers below? One of those “deficit alarmists” must have gotten to him.

Bring back the old Ben, please.

Addison Wiggin
for The Daily Reckoning