Tax-and-Spend, meet Borrow-and-Spend

Rasmussen reports that nearly 2 in every 3 Americans think tax cuts help the economy. Only 1 in 8 think they hurt. It is likely that Republicans will keep tax cuts as their issue. This, in turn, should put pressure on Democrats to borrow and spend, rather than tax and spend. (That Democrats will spend is a foregone conclusion. Democrats are at least as likely to spend now that they hold both houses of Congress and the White House under Obama as Republicans were under similar circumstances under Bush. In other words, a dead certainty.)

Thanks to a high propensity to save among Indians and Chinese, the world has been awash in savings lately. This has kept interest rates low without pushing inflation up. Uncle Sam has been free to borrow without paying much of an inflation price in the short term. But as China and India start to draw down their savings to weather the financial crisis, and Uncle Sam gears up his borrowing to over a trillion dollars per year, something has to give. Will we see higher inflation soon? The people pushing the price of gold higher seem to think so. Gold closed at $940 per ounce today, with prices increasing steadily since the election.