Thursday, March 5, 2009

Geithner To Admit Government Borrowing "Crowds Out" Private Borrowing and Lowers the Standard of Living

In a guidance advisory to the press, the Treasury advises that at 10 am, Secretary Geithner will testify before the House Budget Committee on the President’s Fiscal Year 2010 Budget Proposal. In his testimony, Geithner will testify that unless the budget deficit is cut in half the country "will face higher interest rates as government borrowing crowds out private investment, leading to slower growth and lower living standards for Americans."

Of course, Geithner's solution will be, to a large degree, to raise taxes on the highest tax brackets but, since it is the higher tax brackets that are bond buyers versus other brackets, it is not clear how this solution will help. Taxation will continue the crowding out, just at an earlier stage of the money flow, whereby the taxed don't get to invest the money at all. Spending cuts are the only real answer.


  1. And the only place to find that kind of money is the Pentagon.

  2. I noticed that former Australian prime minister Paul Keating doesn't like Tim Geithner, as a result of Geithner's mishandling of the late 1990s Asian Financial Crisis.

    See article here.