Bailout Harks Back to FDR, With More Risk

'Unimaginable' spending will mean WWII-sized deficit

By Matt Cantor, Newser Staff

Posted Nov 30, 2008 2:37 PM CST

(Newser) – Washington's latest $1 trillion injection into the economy echoes Depression-era and WWII revival plans, but with a dangerous twist, writes Jim Puzzanghera in the Los Angeles Times. Even if the bailouts succeed, the government's mountain of debt will likely bury the next generation in high interest rates and inflation. And unlike Depression-WWII spending, today's rescue plans are not building new factories or creating new technologies.

FDR-era spending sparked an economic revival in the late 1940s, but analysts warn that today's bailouts aim only to keep financial institutions afloat and won't rekindle the economy. Still, Barack Obama has said that his first goal is to keep the economy afloat and create jobs. "As soon as the recovery is well under way, then we've got to set up a long-term plan to reduce the structural deficit," he said.

[Images (2)]

[Quotes (1)]

Obama's administration will take a 'win-at-any cost approach,' Puzzanghera writes. (AP Photo/Charles Dharapak)

We could see a federal deficit 'on a scale not seen since World War II,' Puzzanghera writes. (AP Photo)

« Prev« Prev | Next »Next » Slideshow

The strategy now—and in the coming Obama administration—is essentially the win-at-any-cost approach previously adopted only to wage a major war. - Jim Puzzanghera, Los Angeles Times

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

ECB Makes Massive $639B Loan to Banks

For a period of three years

(AP) - The European Central Bank loaned a massive $639 billion to 523 banks for an exceptionally long period of three years to steady a financial system that is under pressure from the euro zone debt crisis. It is the biggest ECB infusion of credit into the banking system in the 13-year history of the euro. The ECB is trying to make sure that banks have enough ready cash so they can keep on lending to businesses. Otherwise, a credit crunch could choke off growth and spread the debt crisis to the wider economy through the banks. More»

Ex-AIG CEO Sues US Over Bailout

They say takeover violated investors' fifth amendment rights

(NEWSER) - Former AIG CEO Hank Greenberg is suing the US government for $25 million for having the effrontery to bail out the dying insurer. Greenberg was ousted in 2005 after allegedly cooking AIG’s books to inflate its value, but still had a keen interest in the company during the bailout, because his firm, Starr International Co., was its largest shareholder. Now Greenberg’s saying that the bailout of the firm violated shareholders’ constitutional rights, the Wall Street Journal reports. More»

As Vote Looms, Strike Shutters Greece 2nd Day

Austerity measures likely to pass despite enraged public

(AP) - A general strike paralyzed Greece a second day as outraged protesters gathered by the tens of thousands outside parliament today, where lawmakers prepared to vote on intensely unpopular austerity measures needed to secure the next $11 billion installment from the international rescue loans that have so far prevented the country from sliding into bankruptcy. The austerity bill won initial approval in a first vote last night, and deputies are now to vote on the details. "If the law is not approved, including every single article it contains ... the country will once again serve as the scapegoat on which Europe's historic, political, and institutional shortcomings will be dumped," threatened Greece's finance minister. More»

Obama: I Won't Sign Any 'Stop-Gap' Debt Deal

President says budget talks will continue 'every day'

(NEWSER) - Compromise was the theme of President Obama's press conference today, during which he acknowledged that yesterday's budget talks did not result in a deal—but promised that "we're gonna meet every single day until we get this thing resolved." He insisted that he and "all the leaders" agree that we absolutely cannot fail to raise the debt ceiling and thus "allow the US government to default." He also confirmed he is still looking for "the largest possible deal," and that he appreciates John Boehner's "good-faith efforts on that front." Obama also noted that nobody is talking about increasing taxes right now. More»

Greece Passes 2nd Austerity Bill

Final hurdle before receiving bailout funds now cleared

(AP) - Greece has bought itself some time to deal with its crippling debt crisis after lawmakers cleared the final hurdle for crucial bailout funds to be released, which will prevent the country from defaulting next month. The EU and IMF had demanded Parliament pass two bills— an austerity law and a second bill detailing how it will be implemented—before they approve a $17.3 billion installment from the country's $159 billion package of rescue loans. Parliament passed the second law by majority vote today. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Bailout Harks Back to FDR, With More Risk