The Candidates' Fiscal Options Fade

September 29 - An article in the Financial Times today laments that neither presidential candidate was willing to face up to hard fiscal choices, in light of the expected bailout. Warning that the candidates would not be able to afford their tax and spending plans, and that the deficit was projected to sky rocket, the piece argued that:

"If one idea caused the subprime meltdown and the subsequent financial emergency, it was the belief that house prices could not fall... A similar complacency now attends discussion of the fiscal outlook... It is assumed that the US can borrow without limit. In fact, the US has a budget constraint... This limit is about to be tested, and if the global capital market decides enough is enough, the challenge confronting the Treasury and the Federal Reserve will make even last week's exertions seem mild...The next administration's fiscal options are vanishing before our eyes. Somebody should tell the candidates - and the country."