Geithner Takes His Act On The Road

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Budget: It's never a good sign when you want to borrow money
and your potential lender laughs in your face. But that's exactly what happened
to U.S. Treasury Secretary Tim Geithner on his recent trip to
China.

What prompted the laughter? His remarks during a speech at
Beijing University, in which he told the audience, apparently intending to
reassure them about their investments in U.S. Treasuries, "Chinese assets are
very safe."

Maybe that explains what Leno's writers have been doing
since his final show last Friday.
Equally risible were these comments from
Geithner shortly before departing for China: "No one is going to be more
concerned about future deficits than we are," he told reporters as he prepared
for two days of talks with concerned Chinese finance officials.

Obviously, he was showing off his comedic chops, since even that line
was delivered deadpan.
He also insisted the U.S. is "committed to a strong
dollar" — not exactly apparent when you look at the U.S. budget.

The
problem with all this is obvious — and actually, quite serious. As of last
Friday, the Merrill Lynch & Co. Treasury bond index was off 5.1% so far this
year, its worst performance since the index was created in 1977. The dollar
likewise is down — a double loss for the Chinese, who hold an estimated $770
billion in U.S. Treasuries.

Of course, we'd like them to buy more.
That's the reason for Geithner's trip in the first place. Indeed, in March,
Premier Wen Jiabao asked the U.S. to "guarantee the safety of China's assets."

But China's finance officials, many of them educated at the best U.S.
business schools, can do the math. And it isn't very pretty.

Next year,
the U.S. runs a deficit of $1.8 trillion — or nearly 13% of GDP. Last year's
deficit was $455 billion. The deficits will slowly come down from that $1.8
trillion, but not by much, according to the White House's own forecasts.
Geithner says he hopes to slash the deficit as a share of GDP from 13% to 3% by
the end of the decade.

But those projections of declining deficits
depend highly on the rosy scenario cooked up by the White House for the economy.
They expect the economy, for instance, to expand 3.5% next year, 4.4% in 2011,
4.6% in 2012 and 3.8% in 2013. They might be right, but if they are, they'll be
in the minority. Virtually no private sector forecaster expects the economy to
grow that fast.
Over the next 10 years, the U.S. will rack up another $9
trillion in deficit spending — money that will have to be borrowed from someone
— perhaps the Chinese, or maybe strapped and overtaxed U.S. consumers.

Another $1.1 trillion is planned as a possible down payment on
nationalized health care. Add to that the $2 trillion at least that the Federal
Reserve is spending, and government is on the hook for close to $13 trillion.

Given that the White House has built into its projections just $989
billion in added taxes, its clear the deficits will get big and stay that way
for years.

One trip to China by our top bond salesman may not be enough.

As Bloomberg.com reported, 17 of 23 Chinese economists polled before
Geithner's visit said the country's holdings of U.S. Treasuries pose a "great
risk" for the economy.

Still, on Tuesday, Chinese officials responded
with polite reassurances. Geithner said they expressed "justifiable confidence
in the strength and resilience and dynamism of the American economy."

Maybe so. In fact, the U.S. fiscal problem really isn't so intractable,
when broken down into parts.

Summed up, the U.S. is spending way too
much on bailouts and bogus "stimulus" packages that haven't stimulated anything.
And it's expanding the reach of government into areas it has no business being
in — such as running auto companies and banks.

We have far too many
regulations, not too few. We need to embolden entrepreneurs and small
businesses, the backbone of economic and job growth in this country — not spend
hundreds of billions on corporate losers with political clout.

Geithner's future sales pitches to the Chinese and other potential
investors would be helped by a less radical U.S. fiscal approach.

Instead of spending wildly and taxing to the hilt, we should
slash outlays, kill plans for nationalizing health care and lower taxes for all
Americans, rich and poor. Such moves would restore U.S. growth and make all our
investors, foreign and domestic, happy.

[Editor's note: Amen, brother.]