David Stockman lays out the impending bloodbath. From Stockman at dailyreckoning.com:
It’s all over now except the shouting about Obamacare repeal and replace, but that’s not the half of it.
The stand by Senators Lee and Moran was much bigger than putting the latest iteration of McConnell-Care out of its misery. The move rang the bell loud and clear that the Imperial City has become fiscally ungovernable.
That means there is a chamber of horrors coming. With it, an endless political and fiscal crisis that will dominate Washington for years to come. Its cause is deep and structural.
Found Fathers, Fiscal Crisis and the Washington of Today
The founders, in fact, were small government de-centralists and non-interventionists. That’s why they agreed to Madison’s contraption of redundant checks and balances.
Aside from ruthlessly ambitious Alexander Hamilton, the founders wanted a national government that was hobbled by levels of hurdles and vetoes. They wanted a government that could act sparingly and only after thorough deliberation and consensus building.
And that made sense. After all, most believed that the 10th amendment was the cornerstone of the Constitution. Neither Washington or Jefferson envisioned the political and fiscal burdens of running an empire.
“It is our true policy to steer clear of permanent alliance with any portion of the foreign world.” That was George Washington’s Farewell Address to us.
The inaugural pledge of Thomas Jefferson was no less clear in stating, “Peace, commerce, and honest friendship with all nations-entangling alliances with none.”
So when Woodrow Wilson embarked the nation on the route of Empire in April 1917 and FDR launched the domestic interventionism of the New Deal in March 1933, the die was cast. It was only a matter of time before the disconnect between a robust Big Government and the structural infirmities of Madison’s republican contraption resulted in a deadly impasse.
The Fed has now backed itself into a corner and is out of dry powder. Even its Keynesian managers are determined to normalize and shrink a hideously bloated balance sheet. The current account has no basis in sustainable or sound finance.
The time of fiscal reckoning has come. With the financial sedative of monetization on hold, bond vigilantes will soon awaken from their 30 year slumber.
To continue reading: The Imperial City’s Fiscal Waterloo