An article by Paul Krugman released by the NY times describes how cities across America are cutting off the street lights, as well as the cutting of our nations education systems by laying off teachers (which is going to get funded to keep teachers employed by the federal government) in an effort to bring their budgets in-line. I agree with Mr. Krugman that this is a shame. The article also illudes to how our quality of life is steadily going down and will continue to do so. The article can be read here. I differ with Mr. Krugman on a few items though, in one exert he says "And the federal government, which can sell inflation-protected long-term bonds at an interest rate of only 1.04 percent, isn’t cash-strapped at all.". To sell these long-term bonds to raise the money, you have to have buyers other than the Fed. Foreign debt holders are looking for short-term debt holdings so they are not stuck later on. Back in 2009, China and Japan were almost exclusively buying short-term debt (see ref). If the Fed is the buyer of the bonds, because nobody else will, the fed has to print the money out of thin air to essentially monetize the government debt ( and the Fed has definitely increased its buying of long-term bonds).
The risks to this strategy are when the Fed takes this onto its balance sheet we are trading government IOU's for Fed IOU's which could become destabilizing to the dollar and U.S. Inflation (per Scott Anderson Sr. Economist at Wells Fargo). We also expand our debt (which happens when the Treasury issues the bonds), sure it is at a low interest rate, but it is money we didn't owe before, adding to the bill that will eventually come due. Another quote "How did we get to this point? It’s the logical consequence of three decades of antigovernment rhetoric, rhetoric that has convinced many voters that a dollar collected in taxes is always a dollar wasted, that the public sector can’t do anything right.". Well the government has a great track record of doing so. The amount of expansion in government over the past few decades has caused a more costly government. Especially now, more financial agencies are being created to watch the watchers who missed it the first time (I remember a whole slew of agencies being rattled off in 2008 and 2009 who were asleep at the wheel). We don't need more watchers, we need enforcement of laws that are being side stepped. Out of the whole 2007-to present debacle who has been arrested from the financial institutions that caused this (nobody really). We need real leadership to get us out of this mess. Yes, it is going to take pain (more taxes) that we shouldn't have had to pay while big financial institutions that caused the mess, by taking unnecessary risks, give record bonuses. It is a sad sight that the public is the one held account for these actions.
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