WASHINGTON -- If the U.S. Congress passes a proposed financial rescue plan, the U.S. government's debt could rise by as much as $700 billion.
If it doesn't, some -- including President George W. Bush -- says the consequences could be far worse.
"The dramatic drop in the stock market that we saw yesterday will have direct impact on the retirement accounts, pension funds, and personal saving of millions of our citizens, and if our nation continues on this course, the economic damage will be painful and lasting," Bush said.
Yet the two candidates now running for president -- Republican Senator John McCain of Arizona and Democratic Senator Barack Obama of Illinois -- have spoken of ambitious plans for their administrations, particularly in foreign policy.
One way or another, the United States is going to have to cut back on its spending, including foreign affairs, according to Thomas Carothers, the vice president for studies at the Carnegie Endowment for International Peace, a policy research center in Washington.
Carothers says there are three areas of international relations that would be affected by cutbacks the next president might need to make. The first is defense, which he said would be painful to McCain, given his military background.
The second, Carothers says, is foreign aid, something that Obama has promoted as part of his planned effort to improve America's image abroad.
The third would be diplomacy. Carothers says spending at the State Department has declined during the Bush administration, while budgets for other cabinet agencies -- particularly those involved with security -- have risen.
Carothers says it's difficult now to see how spending constraints would affect specific countries, such as Pakistan and Egypt, which are now leading recipients of U.S. aid. He says the same is true, for the most part at least, in Central and Eastern Europe and in Central Asia.
"Ukraine is still a major recipient of U.S. assistance," Carothers says. "We've seen the proposed new aid package to Georgia -- the billion dollars for Georgia. Although these kinds of efforts -- to shore up close friends of ours in the region with emergency aid packages -- would come under greater scrutiny, we might still do them in the case of Georgia because a billion dollars, I guess, could be found. But there would just clearly be limits of kind of dipping into the pot to help the friend in need."
As for the wars in Iraq and Afghanistan, Carothers doesn't expect big savings anytime soon. Already the United States is spending $10 billion a month in Iraq, though significantly less in Afghanistan.
Carothers says a President McCain would continue to spend generously on the war in Iraq. A President Obama has promised to begin significant force withdrawals from Iraq by spring of 2010, but Carothers notes that he's promised to shift a large portion of these troops to Afghanistan.
Ultimately, Carothers concludes, either a President McCain or a President Obama would have to scale back their goals.
"I think any effort to do a very large foreign aid initiative of the type Obama talked about would be very difficult, in this environment, to sell to the American people -- that we're going to do a lot more foreign aid, given how hard America's being hit [financially]," Carothers says. "It's harder for me to see that [under a President McCain] we'd crimp sort of specific military campaigns, but I think we would slow our defense buildup."
Ted Galen Carpenter, however, doesn't expect either candidate to make major adjustments to their foreign policy plans. Carpenter is the vice president for defense and foreign policy studies at the Cato institute, another Washington think tank.
Perhaps, Carpenter says, there may be an accelerated drawdown of U.S. forces in South Korea, a reduction in humanitarian interventions, or a slightly quicker military withdrawal from Iraq.
But Carpenter sees no evidence that either candidate, if elected, would make a concerted effort to offset part of the debt by paring down or even canceling expensive weapons systems. He points to the work on a new submarine, and especially the development of two new jet fighters.
"Given the fact the United States has no [military] peer competitor in the world, and none really on the horizon, do we really need to have two major, very expensive fighter-plane programs?" Carpenter asks. "I don't see any inclination on the part of either candidate to make these kinds of hard choices. It's as though they think we can simply pile on this additional burden of $700 billion and not have to make any choices about offsetting cuts."
According to Carpenter, McCain and Obama are making unrealistic campaign promises, and he sees no evidence that either, if elected, would realize the financial limits he would face if he were president.
To support his thesis, Carpenter points to President Ronald Reagan, a hero of fiscal conservatives, as an example of a president who preached fiscal discipline but sent the United States into increasing debt. The same, he says, goes for the current administration.
"All we saw was a modest decline in the rate of growth of domestic spending during the Reagan years," Carpenter says. "And military spending, obviously, exploded during that period, as did the federal budget deficits. Consider the fact that we have seen rather sizable federal budget deficits throughout the Bush administration. I'm not convinced that the new president is going to assume that we cannot proceed on a similar basis for the next four years."
Carpenter says it's sad that it takes a crisis on the scale of the current financial emergency to even raise the question of responsible spending by the government. He says it may take an even bigger crisis to persuade a President McCain or a President Obama to begin questioning the U.S. Treasury's priorities