Global Worries Over U.S. Stimulus Spending

With the Davos World Economic Forum taking place this week, economists from around the world are starting to ask tough questions from the U.S. government about its plans to finance the Obama administration's trillion-dollar stimulus package, according to this article in the NYT.

Indeed, leaders from developing countries such as Mr Ernesto Zedillo, the former president of Mexico, are becoming concerned that their own borrowing needs may soon be drowned in the coming flood of new U.S. Treasury bonds to be emitted by the Obama administration to pay for its stimulus package.

Moreover, there is concern around the world that the value of the dollar might collapse against other currencies, driving both interest rates and inflation up in other countries. And foreign leaders are questioning exactly how Mr Obama intends to pay for all this debt in the long term. To quote the article,

The stimulus was approved Wednesday by the House without Republican support, and could grow larger — mostly likely with additional tax cuts — to attract a bipartisan coalition.

American officials maintain they are aware of the challenge. A top White House adviser, Valerie Jarrett, promised in Davos on Thursday that once the stimulus plan achieved its intended affect, the United States would “restore fiscal responsibility and return to a sustainable economic path.”

Ms. Jarrett, a confidante of both President Obama and his wife, Michelle, is the highest-ranking administration official at Davos.

To be sure, Congress and the White House will ultimately need to refill the government’s coffers, but how they might do that is barely on the radar screen in Washington at this point.

For all the funny caricatures of George Bush I've been posting on this blog, I'm actually starting to miss Mr Bush... always the skeptic, I've long stopped believing Mr Obama will do any better at this point. And at least George Bush was a great subject for caricaturists such as Steve Bell and KAL. Whereas Mr Obama's inauguration party may be shortly followed by a serious economic hangover that may not inspire many a good laugh-even from cartoonists.