Why is America in an economic pickle?
Short answer: Encouraged by government interventions that sent incorrect financial signals -- including artificially low interest rates and mandates designed to make housing "more affordable" -- America continued to "borrow and spend" when we would have better off to pay down our debts and start saving.
That makes this week's White House response to South Carolina Gov. Mark Sanford deliciously symbolic.
Gov. Sanford wanted to use part of the $700 million in "stimulus" funds being sent to his state to pay down South Carolina's debt -- specifically, future obligations under the state's pension system.
No no, responded White House Budget Director Peter Orszag in a letter this week (even as the Democratic National Committee took out ads, criticizing Gov. Sanford for not grabbing the "free" money for schools and medical subsidies.) The $787 billion stimulus bill doesn't allow any of that money -- which will likely be borrowed -- to be used to pay down debt, Mr. Orszag explained. The whole idea was to require the states to spend, spend, spend -- ratcheting up budgets which could require tax hikes to sustain in future years.
Kind of like advising a drunk that the best cure for a hangover is to start drinking again.
It may seem to relieve short-term symptoms. But the long-term consequences are likely to be ... well, sobering.