Where In The World Are We Headed? A Riddle, Wrapped In A Mystery Inside An Enigma.

That’s the way Winston Churchill, whose 1939 words we borrowed for our headline this week, where he asked about America, might answer the questions of today.  In foreign affairs America did its best in the past two years to reshape her relationships with the rest of the world.  So far very little have been achieved in this context, I believe the Americans have made little progress in this context.
At home, according to the non-partisan Congressional Budget Office, we may overspend more than $1.5 trillion this year, on top of $1.3 trillion we overspent last year.  Michael Boskin, Professor of economics at Stanford University believe that the spending being made by this government is likely to add more to our debt during President Obama’s first term than all the debt accumulated by all the previous governments.
It is believed by everybody that President Obama himself may not like to continue in his office without any real economic turnaround. The question rises does the Administration want to see real economic growth in the country?  He must have been pursuing policies to achieve the goal of real economic turnaround? To the ultimate disappointment of the nation his Administration is spending much more effort stoking the fiscal fire than dousing it. Mr. Obama has almost ignored the recommendations of even his own Debt and Deficit Commission, making it easy for the Republicans and Democrats to oppose the commission’s recommendations.  The analysts like Douglas Holtz-Eakin believe that U.S. debt may lose its AAA credit rating within the next three years.
Moreover, the financial condition of the many states is worse than the federal fiscal state.  As the federal government may tend to print money to meet it’s spending that the other states do not have.  These states, collectively, will have to wait for the worst things to happen. Almost every state faces substantial budget shortfalls.  The economic stimulus money that flowed to the states has run out.  Meanwhile, few states have done anything to trim their often-bloated budgets, largely because the stimulus money shielded them from the need to practice any semblance of frugality.
Economic Policy Journal reads that the US Treasury has been conducting a shadow bailout of at least 32 states. According to the Journal, over 60% of Americans receiving state unemployment benefits have been getting these payments because the federal government stepped in to cover the commitments but the states are in no position to cover. It does not mean that federal government has lots of money to cover the states expenses in every way they mean. Just see, the $40 billion in unemployment benefits advanced to the states by the federation is a small part of the $3 trillion in estimated unfunded liabilities that now reside at the state and local level.
The worse things may yet be in the waiting for the states as their representatives to Congress who were supposed to rein in spending and cut the deficit, are in no mood to serve the cause.
Is this state debt a long term and infrastructure related and not an operating expense? The question may need many economic experts to brood over the related liabilities. Believe it or not, while some states have, in fact, been mindful of the need to balance obligations with their real income, the states like Illinois, New Jersey, Pennsylvania, Colorado, Kentucky, Kansas, and California have recklessly committed themselves to pension obligations without taking responsible steps to fund those commitments.
I hope that every single voter of the nation knows that we may have to undergo many painful processes in bailing out the nation from the economic nightmare. It will be better for us to face the reality as sooner as possible and the reality is that there are no “untouchables” in these budgets other than the debt service incurred to those who have loaned money to the government.  The Republicans and Democrats are going to be treated by the press they deserve.