President Obama will join other G8 leaders today at the posh, French seaside resort of Deauville. On the agenda: proposed global regulations for the Internet, post-tsunami Japan, and military escapades in North Africa. Bizarrely absent from the top priorities listed by hosting head of stateNicolas Sarkozy is the most urgent issue of all: the need to rein in massive government over-spending and debt.
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One needn’t travel to France to get a clear view of this problem. Here in the US, for example, federal revenues will top $2 trillion this year, but federal spending will approach double that amount. Such reckless spending has set the stage for a battle royal between Democratsand Republicans over raising the national-debt ceiling.
House Speaker John Boehner (R) of Ohio has correctly warned that increasing the debt ceiling without a firm commitment to slash spending would signal to investors that America still is not serious about kicking its spending addiction.
Meanwhile international credit rating agencies are threatening to do the US Federal Reserve’s job: taking the punch bowl off the table and telling people the party is over. America’s vaunted “Triple AAA” credit rating is no longer a given in global finance. If the US loses it, federal borrowing – now more than 40 cents of every dollar spent – will become much more costly.
It all provides a rather tumultuous backdrop for Mr. Obama’s trip to the G8 Summit. But he’s not the only participant facing a bumpy ride.
Europe's day of reckoning
Europe also faces its day of reckoning after decades of overspending and overpromising. TheEurozone, as currently fashioned, appears to be on the verge of collapse. This helps explain the continental frenzy over the arrest of former IMF Chief and French presidential hopeful Dominique Strauss-Kahn. Europeans had been counting on him to funnel yet more IMF billions to Euro-deluded deadbeats like Greece and Portugal.
Mr. Sarkozy and the rest of the European leaders at the G8 have some explaining to do: If they won’t offer a plan to right the world economy, they should at least engage in an honest evaluation of the policies that have led so many countries to the brink of financial ruin.
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