U.S. companies, consumers and communities may grow so addicted to government financial help that cutting them off could trigger another recession soon after the current one ends.
Between the U.S. Federal Reserve’s trillions of dollars in lending programs, the $787 billion stimulus package and $700 billion — and counting — in bank bailout funds, no one can accuse officials of soft-pedaling their crisis response.
But there is increasing concern that when the flow of public money subsides — beginning next year when much of that stimulus package is spent — the economy still won’t be strong enough to stand on its own.
“The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggests that by late 2010, the specter of a second dip into recession will be looming large,” said Merrill Lynch economist Sheryl King.
And this comes on top of Warren Buffett’s latest epistle to battered Berkshire Hathaway shareholders:
“In poker terms, the Treasury and the Fed have gone ‘all in.’ Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.
“These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.
“Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.”
So Bobby Jindal was dead right when he refused to accept Federal “stimulus” subsidies for Louisiana state unemployment benefits. His argument was a simple one:
“The federal money in this bill will run out in less than three years for this benefit and our businesses would then be stuck paying the bill,” Jindal said. “We must be careful and thoughtful as we examine all the strings attached to the funding in this package. We cannot grow government in an unsustainable way.”
If Jindal can keep Louisiana out of a so-called “double-dip recession” while the rest of the nation (especially CA and NY) falters, then he will be a popular hero and possibly the leading Presidential contender for 2012. Of course this is why Jindal is directly in the cross-hairs of the Netroots, DNC, Obama Administration, and mainstream media. He must be torn apart and destroyed at a national level right now, and continually pilloried and negatively branded for the next three years, before he has a chance to gain popularity as an effective Conservative and a potential challenge to The One.