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There are some things I understand about the $700 billion dollar bailout plan. The financial markets were, in fact, in a state of total chaos. The government needed to do something that would assuage the general fear in the marketplace and provide some government support to a rapidly deteriorating market place. It would hurt to shell out $700 billion to companies that should never have gotten to overleveraged and taken on so much risk, but in a lot of ways it had to be done (this last point is arguable).
With that mind, however, I can’t help but wonder who is watching Uncle Sam’s tolerance for risk and spending. We’re shelling out hundreds of billions of dollars that will be tacked on to an ever increasing pile of debt. All told we’re staring at the bottom of a $53 trillion dollar hole.
So what’s next for Uncle Sam? There’s going to be some decisions to be made. In particular, we’re facing some tough love in the near future. It’s likely we’ll have to raise taxes, cut benefits like social security and medicare, or both. No one wants to do either one of these things, but that’s the reality we face.