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News Conference Tanks Market


The President came on TV at 1:30 today to discuss the deal he cut with the Republicans to extend the Bush tax cuts. You can clearly see that investors did not like what they heard. There is still a half hour to go before the market closes, so we could recover some in final minutes – my guess is we do get at least a healthy bounce.

The two year extension is pro-growth but at some point we will need to have a serious discussion in this country about our national debt. Stephen Wellman notes that: “By 2025 (tax) revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities.”

Maybe during the two year extension, we can get a serious debate going to figure out how to avoid the problems noted above. It will be difficult to have pro-growth policies and pro-debt reduction policies without some serious cost cutting. Maybe that is why the Deficit Commission only got 11 of the needed 18 votes to move the Bowles-Simpson plan on to Congress. No one in Washington wants to face the music – yet.

Today is the anniversary of the bombing of Pearl Harbor, so in memory of that day I thought a video from that era would be appropriate (if you are reading this on Facebook, the videos don’t always follow the feed from the blog so I’ve included a link for you to follow):

Click here to watch Cohan\'s \"Over There\"