Paulson Plan Wlll Set New National Debt Records

Some ugly details emerge about the cost of the Paulson/Bernanke plan in terms of cost. It will be hugely expensive: 

Treasury Secretary Henry Paulson’s $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds.

The plan, which asks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year, economists estimated.

":This is sobering, absolutely sobering, even to someone who doesn’t drink,” said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington.

At risk for the world’s largest economy: a jump in interest rates prompted by the glut of additional Treasuries needed to finance the plan, and a diminished desire among international investors to add to their holdings. The dollar yesterday slid the most against the euro since the European currency’s 1999 introduction.

During a five-hour hearing of the Senate Banking Committee today, Paulson said it is "difficult to determine” what the ultimate cost of the plan would be, though he said the objective is to minimize the cost to taxpayers. He’s asking lawmakers to lift the legal ceiling on the federal debt to a record $11.3 trillion from the current $10.6 trillion.

Wow . . .

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Source:
Paulson Plan May Push National Debt to Post-World War II Levels
Matthew Benjamin 
Bloomberg, Sept. 23 2008 
http://www.bloomberg.com/apps/news?pid=20601087&sid=anJ4Egj1nXS8&

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