Friday, January 21, 2011

The Republican side of the House of Representatives has introduced a bill which outlines significant cuts to the budget. Prompted by the popularity of the Tea Party, this bill kills the new health care scheme, reduces discretionary spending and proposes other cuts totaling $2.5 trillion dollars over ten years. This would be an excellent start to reining in our out-of-control government - except I don't believe it.

(1) The neo-conservatives in the GOP may be running scared and trying to hide their big-budget ways, but they will be very unhappy and will won't spare effort to weaken or destroy the bill behind the scenes.

(2) They would then have to run the gauntlet of the Senate, which still has a Democratic majority and isn't likely to pass such a bill.

(3) The bill would then go before Obama, who won't want to admit mistakes and would almost certainly veto such a bill, and there's no way enough of our congress-critters would vote to override it.

We can hope for change, but Obama has already co-opted Hope and Change.
This news story says the Federal Reserve is planning to use an "accounting tweak" to prevent insolvency. Huzzah! One problem though: While modifying the Fed's accounting strategy may save it from internal trouble, it increases the risk and amount of inflation by allowing the Fed to release more currency into the market. Couple this with "quantitative easing" and with how unlikely the current Congress is to significantly cut spending, and we're seeing no limit to how far the dollar can inflate.