Letter: Our national fiscal meltdown | VailDaily.com

Letter: Our national fiscal meltdown

Jim Bottomley
Vail, CO Colorado

I am greatly concerned that most of our Congress, and certainly our Administration, and those seeking the Presidency, all display either ignorance, or wishful thinking, that the situation I discuss here will simply go away.

The truth is, the longer we wait to stabilize seven years of fiscal irresponsibility, the more likely it is to get out of control.

We face a loss of confidence by those nations from whom we are borrowing to finance our wars in Iraq and Afghanistan.

Failure to do this will accelerate the dollar’s slide in value on world markets.

The interest rates on bonds sold to continue borrowing will go up in order to get the bonds sold. The discount rate on these bonds at auction will increase to overcome sales resistance. Both events increase interest rates at home and lead to inflation. This exacerbates the dollar’s slide. Imports become more expensive, and retail sales will slow down because so much of our economy is now based on imported goods. Imported oil becomes more expensive, adding to inflation. This in turn could lead to oil exporting nations establishing oil prices on the Euro instead of the dollar, to ensure them of a more stable price.

Again, this leads to lack of confidence in the American economy and tends to increase inflation. This cannot be controlled by the Fed reducing interest rates on bank loans. The pressure downward in dollar value will be too great.

Increased interest rates will cause more problems in the housing market, which has not yet seen the bottom. House foreclosures and bankruptcies result in less consumer spending, especially in retail sales.

Concern has been expressed that countries holding large dollar reserves may want to dump those holdings. But it seems to me unlikely, because unloading these reserves will hurt the U.S. markets where they have major exports. But, you can bet they are already looking elsewhere for a safe haven for huge dollar cash surpluses accumulated through exports to the U.S. in recent years.

So, how do we get out of this mess?

1. We must restore world confidence in the U.S. economy.

2, We must show the world we are now taking steps to drastically slow down this

slide into bankruptcy.

3. Unlike WWII (which I fought in), Bush-Cheney have never called for sacrifice (other than by our soldiers). Their idea was tax cuts for the rich, and to tell people to go shopping.

4. We must stop this wasteful spending on the war, and on reconstruction in Iraq now! Except for Iraqi corruption, their oil reserves should be adequate to meet their needs.

5. We must increase Federal revenues by restoring an equitable tax burden on the rich and aggressively stop the outflow of dollars to tax havens, and through outsourcing American jobs to low wage countries.

6. To regain confidence in the American economy we must now make the sacrifices that have been postponed by Bush-Cheney and their Republican majority over the past seven years.

The alternative to waiting until 2008, is certainly dumping the fiscal problem on our children and the returning soldiers.

We note that no one wants to speak out on the fact that Bush-Cheney have spent the Social Security surplus taxes to make our deficit look less bad. How do we repay this on top of our nearly $10 trillion debt?

Obviously none of the candidates seeking election in 2008 wants to talk about these truths. As usual, they will simply ignore the problem until it is out of control, and then blame it on others. But, those of you who have courage, like David Obey and John Spratt, had better make the public aware of the danger now, before it is out of our control.

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