See? There’s nothing Congress or the President can do about spending anyway. The fiscal car’s on cruise control. That way when we go careening into the abyss (off the existential cliff, not the “fiscal cliff”) Thelma and Louise style it’ll be no one’s fault. (Except everyone’s. And “everyone” includes you and me.)
Rather than discuss restraint, the administration has increasingly turned to the Federal Reserve as a crutch. The Fed is borrowing and spending $85 billion per month on bonds, and it claims the legal authority to increase its debt at will. Wall Street is intensely focused on supporting this profligacy and profiting from it. The Fed’s debt will reach $4 trillion at year-end, with at least $200 billion of it not counted properly in the national debt.
The Fed is choosing to buy long-term bonds with short-term debt. The result is a rapid shortening in the effective maturity of the national debt that benefits current politicians but puts taxpayers at risk. Like an adjustable-rate mortgage, the borrower, in this case the government, gets a lower interest rate now but will have to refinance at higher rates later.