President Trump wasn’t going to ruin his State of the Union address by mentioning America’s inconsequential national debt. From MN Gordon at economic prism.com:
Another week. Another week of distractions. On Tuesday, for instance, was the great State of the Union Address. To this, many opinions and observations have been offered. Here, we’ll contribute several of our own…
President Trump is a showman of stout ego. How he must have relished the run-up to Tuesday’s primetime address with impatient anticipation. What a disappointment it must have been to look out from the podium of the House of Representatives at the 116th Congress and see the greatest assemblage of political crooks, lowlifes, and losers in living memory staring back at him.
But the show must go on…disappointments and all. For life’s full of disappointments. The many botched opportunities. The countless hours wasted on bids for ridiculous jobs. Super Bowl Sunday. Duds, dissatisfactions, and disappointments come a dime a dozen.
Words are also the source of many disappointments. Words that shouldn’t have been said. Words that should have been said.
So, too, words, and the absence of words, can be distractions. And within a sequence of words there are sometimes obvious omissions.
For example, nowhere within the 82 minute State of the Union Address was there a single word of the country’s burgeoning $1 trillion budget deficit. Nowhere was there a word of the great $22 trillion national debt default that’s bearing down upon us like a savage hurricane along the Gulf Coast. Nowhere was there mention of the $122 trillion in unfunded liabilities, which includes the sacred cows of social security and Medicare.
No One Cares
The real State of the Union – the one President Trump omitted from his address – is a state of impending doom brought on by 50 years of relentless debt accumulation. Day after day, week after week, month after month, year after year, the federal government has spent more than it takes in. Now the debt has piled up past the point of no return; there’s no longer an expedient way to reverse course.
This is the real State of the Union. This is the story that’s being entirely ignored by the President and Congress. This is the story of America’s decline. This is a story that’s too grim to mention. And this obvious omission from Tuesday’s address is what makes the affair nothing more than a great big distraction.
So where do things stand? Several of the ghastly numbers were presented above. The present progression is presented below…
To begin, the temporary suspension of the debt limit will be reinstated on March 2. At the moment, no one cares. Come March 2nd, almost no one will care – save Treasury Secretary Steven Mnuchin. That’s when he’ll have to execute “extraordinary measures” to keep the lights on in Washington.
Extraordinary measures, in Treasury Secretary parlance, involves suspending contributions to federal employee retirement and disability funds. From what we gather, these shenanigans will likely stretch out the Treasury’s remaining funds until mid-to-late summer.
After that, the federal government will no longer be able to pay its bills – including interest payments on Treasury notes. The full faith and credit of the U.S. government will fall into arrears. In other words, the U.S. government will start defaulting on its debt obligations.
Of course, this would never happen in the land of the free, right?
The Big Government Show Must Go On
Mnuchin, if you didn’t know, is a bigtime movie buff. He’s financed and produced countless movies through his various entertainment ventures. American Sniper, Mad Max, Black Mass, and various superhero movies are just a few of the flicks he’s had a hand in.
Mnuchin, like the President, also knows a thing or two about bankruptcy. Several years ago he was co-chairman of the movie company Relativity Media. He exited his position stage left seven months before the company’s July 30, 2015 bankruptcy filing.
Apparently, Mnuchin and other investors lost $80 million. But in the process, the company’s slate was wiped clean and free of obligations. Several years later the company again filed for bankruptcy. And today, the studio’s once again open for business.
By our estimation, the odds that the U.S. Treasury outright defaults on its debt ranges from slim to none. An 11th hour deal to raise the debt ceiling will inevitably be made. But this won’t solve the debt problem. This won’t wipe the slate clean.
The populace still favors an expanding federal government that’s funded solely by greater and greater issuances of credit. The populace still believes the promise that they can get something for nothing. That, somehow, the rich can bail them out.
Yet this isn’t mathematically possible. Not even the stinking rich have anywhere close to the $122 trillion needed to keep the show going. But the big government show must go on. Thus, you can already sense what’s coming…
When financial markets crack, and the economy collapses, and the populace pleads for someone to “do something,” the President and Congress will oblige with imprudent confidence. QE for the people will be granted with money from nothing. Debts will be paid in full. The currency will go up in smoke.
After that, things will go completely mad.