Friday, November 26, 2010
'Next financial crisis could stem from Washington'
Chief of the FDIC, Sheila Bair, urged policy makers in a Washington Post op-ed piece to confront the US' rising debt, so as not to trigger another financial crisis. Bair asserted that allowing the US debt, now at close to 14 trillion dollars, makes US treasuries seem less stable to investors. And, if investors and governments around the world lose confidence in US treasuries this will have dire consequences for the world financial system. Bair said that, although their suggestions have been met with mixed reactions in Washington, the proposals suggested by President Obama's fiscal commission and the Bipartisan Policy Center are "credible first steps."
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I agree we definitely need to cut spending and raise taxes in the long term to decrease the deficit. However, with our economy still struggling to recover from the latest financial crisis and unemployment stuck at 9.6% this is definitely not the time to cut jobs in the public sector or raise taxes on the middle and lower class. In the short term, we need to invest public money in infrastructure and projects like energy efficiency that will benefit us and save us money in the long-run. Once we have climbed out of this hole, we should work on cutting back, but if we try it too soon we will only damage the economy further. Like Dr. Skosples says, exercise is good in the long run but you need to rest if you have an injury or else you will just make it worse.
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