Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 4/13) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics. 

Americans are not stupid. They fear the huge deficits stemming from the budget proposed by President Obama, and they know that someone is going to have to pay for them. Moreover, they recognize that in all likelihood the numbers will only get worse. Indeed, only weeks after the budget was released, the Congressional Budget Office estimated that total outlays would exceed Obama’s projections by $2.3 trillion between 2010 and 2019. And that was before Congress axed some provisions that would have raised revenues.

How big are these future deficits? According to the CBO, the cumulative deficit under the president’s proposals would total $9.3 trillion in that time period. Boiling this down – really, who can deal with trillions? – the CBO reports, “Debt held by the public would rise, from 41% of GDP in 2008 to 57% in 2009 and then to 82% of GDP by 2019.” Eighty-two percent! According to a Rasmussen poll out today, 85% of Americans are worried about rising inflation – are we surprised?

Americans are hosting tea parties not only because they are worried about rising taxes and inflation – but also because they think our tax system is unfair. Astonishingly, only 14% of Americans think that people with higher incomes pay proportionately more in taxes. The reality is that the top 5% of earners in this country pay more than half of all federal taxes. According to a Harris poll conducted by the Tax Foundation, “nearly one-third of all tax filers currently have no federal income-tax liability … two-thirds believe that everyone should be required to pay some minimum.” In short, everyone feels cheated.

The administration faces a daunting task. Even though there are signs that the pace of the economic slide has moderated and that we may be bumping along the bottom, most economists still encourage stimulus spending. The banking sector remains fragile in the extreme, while most other industries (except gun manufacturing) are hurting as well. Clearly, however, not all Americans support the government’s efforts to prop up banks, autos, stressed homebuyers, the growing ranks of the unemployed — or the economy overall. Amid this growing frustration, the Obama team cannot afford a screwup.

Unfortunately, one of the trickier phases of the financial rescue plan is almost upon us. Quite soon the government will report the results of the bank stress test. It is widely expected that all 19 major banks will pass, but also that some will be deemed stronger than others. (Hello! The stock market has made that clear for months.) One industry leader uncharitably described the stress tests as “asinine” and FDIC insiders are reportedly panning the program as meaningless.

Treasury Secretary Geithner has his work cut out for him if he intends to rely on the stress data as a rationale for demanding new TARP funding from Congress. Recent upbeat earnings reports from a number of banks have complicated the message. Does Goldman Sachs, which just raised $5 billion from a stock sale unassisted by the government, and which says it wants to repay its $10 billion in TARP funds, need government backing or not? If not, why is the company still relying on $28 billion in guarantees from the FDIC — and suggesting they may increase that figure to $35 billion? It’s complicated.