Long after coronavirus is but a memory, our children and grandchildren will be paying for it. From Ron Paul at ronpaulinstitute.org:
According to the Congressional Budget Office’s (CBO) latest “Update on the Budget Outlook,” this year’s $3.3 trillion federal deficit is not just three times larger than last year: it is the largest federal deficit in history. The CBO update also predicts that the federal debt will equal 104 percent of the gross domestic product (GDP) next year and will reach 108 percent of GDP by 2030.
The CBO update also shows that the Social Security, Medicare, and highway trust funds will all be bankrupt by 2031. This will put pressure on Congress to bail out the trust funds thus further increasing the debt.
This year’s spike in federal spending was caused by the multi-trillion dollar coronavirus relief/economic stimulus bills passed by Congress and signed by the president. However, spending had already increased by $937 billion from the time President Trump was sworn in until the lockdown.
Federal spending is unlikely to be reduced no matter who wins the presidential election. Former Vice President Joe Biden has proposed increasing spending on everything from Obamacare to militarism to “green” cronyism. Yet some progressives are attacking Biden for being to “stingy” in his spending proposals. Even more distressing is how few progressives are critical of Biden’s support for increasing the military budget.
With some notable exceptions, such as his infrastructure plan, President Trump is not proposing any massive new spending programs. However, he Is not promising to stop increasing, much less cut, federal spending.
Make no mistake, America is getting massively poorer by the day. From David Stockman at lewrockwell.com:
Maybe it is time to don our tinfoil hat. Here’s the flat-out lie the WSJ reported this morning in response to the weekly unemployment claims release. It sure did make you think that the jobs picture is improving by the week:
The number of people receiving benefits through regular state programs, which cover the majority of workers, decreased by 1.1 million to 16.2 million for the week ended July 11. The decline extends the recent trend, with the number receiving benefits the lowest reading since the week ended April 11.
Just to make sure you grasped the good news, the WSJ added this chart for good measure:
Actually, there was no improvement at all this week!
And what remains is the greatest labor market disaster in history. As Wolf Richter observed in his excellent post on the heels of the DOL (Department of Labor) report:
If you read this morning or heard on the radio that 16.2 million people were claiming unemployment insurance – the “continued claims” – and you thought that there were only 16.2 million people who claimed unemployment benefits, you fell victim to lazy misreporting in the media, by reporters or bots that didn’t read the Labor Department’s press release beyond the second paragraph.
Read through to the end of this article for the sickening list of “emergency relief” measures in the spending orgy coming out of Washington. From David Stockman at lewrockwell.com:
Nancy Pelosi, Chuckles Schumer and the rest of the Dem wrecking crew surely have the Trumpified GOP by the short hairs.
The latter are clueless about the real imperative, which is to halt the senseless shutdown of the US economy ASAP. So like deer caught in the headlights of public fear, outrage and hurt by the Covid Quarantines, they have blindly succumbed to bailing out one and all; and that, in turn, has opened the US Treasury to a congressional feeding frenzy that would make the New Deal porkers, the LBJ spenders and the Obama shovel-ready folks green with envy.
In less than a month, they have passed the $8.3 billion vaccine bill, the $100 billion relief and paid leave package and the $2.2 trillion Everything Bailout, and are now racing toward another $1.0 trillion interim CARES 2 funding bill to essentially double-down on all the outrageous pork and Free Stuff that was contained in CARES 1, which the House did not bother to even debate or approve by recorded vote.
And, alas, all of this is preliminary to the impending “stimulus/infrastructure” bill where the bidding starts at $2 trillion, meaning that the Imperial City is in the throes of a fiscal bacchanalia that defies imagination. It will leave America with unspeakable debts, political dysfunction and economic debilitation for years, if not decades, to come.
Bipartisanship: the Democrats okay funds for the Republicans’ warfare state, the Republicans okay funds for the Democrats’ welfare state. From Ron Paul at ronpaulinstitute.org:
Listening to the howls from Democrats and the applause from Republicans, one would think President Trump’s proposed fiscal year 2021 budget is a radical assault on the welfare state. The truth is the budget contains some minor spending cuts, most of which are not even real cuts. Instead they are reductions in the “projected rate of growth.” This is equivalent of saying you are sticking to your diet because you ate five chocolate chip cookies when you wanted to eat ten.
President Trump’s plan reduces the Education Department’s budget by nearly eight percent, leaving the department with “only” 66.6 billion dollars. Cuts to other departments are similarly small, while reductions in entitlement spending consist mostly of reforms that will not affect most of those dependent on these programs.
President Trump deserves credit for proposing an 11.6 billion dollars cut in funding for the Department of State and the US Agency for International Development (USAID). Foreign aid does little to help impoverished people overseas. Instead, it benefits foreign government officials willing to do the US government’s bidding. The State Department and USAID are extensively involved in US intervention abroad, including efforts to overthrow governments.
Is the repo crisis prelude to market rejection of US government debt at anything close to current interest rate levels such that the Federal Reserve will have to monetize an ever-increasing portion of that debt? Dmitry Orlov thinks so, and he could well be right. From Orlov at cluborlov.blogspot.com:
In processing the flow of information about the goings on in the US, it is impossible to get rid of a most unsettling sense of unreality—of a population trapped in a dark cave filled with little glowing screens, all displaying different images yet all broadcasting essentially the same message. That message is that everything is fine, same as ever, and can go on and on. But whatever it is that’s going on can’t go on forever, and therefore it won’t. More specifically, a certain coal mine canary has recently died, and I want to tell you about it.
It’s easy to see why that particular message is stuck on replay even as the situation changes irrevocably. As of 2019, 90% of the media in the United States is controlled by four media conglomerates: Comcast (via NBCUniversal), Disney, ViacomCBS (controlled by National Amusements), and AT&T (via WarnerMedia). Together they have formed a corporate media monoculture designed to most effectively maximize shareholder value.
As I wrote in Reinventing Collapse in 2008, “…In a consumer society, anything that puts people off their shopping is dangerously disruptive, and all consumers sense this. Any expression of the truth about our lack of prospects for continued existence as a highly developed, prosperous industrial society is disruptive to the consumerist collective unconscious. There is a herd instinct to reject it, and therefore it fails, not through any overt action, but by failing to turn a profit because it is unpopular.”
All the so-called economic growth we’re getting is debt-funded. From John Mauldin at interest.co.nz:
John Mauldin sees an ugly conflict coming soon to the US as their official debt levels become unsustainable and they face a “Great Reset”. Will a better wealth and policy balance rise from the impending shambles?
Nothing is forever, not even debt.
Every borrower eventually either repays what they owe, or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away.
One of Western civilization’s largest problems is we’ve convinced ourselves debt can be permanent. We don’t use that specific word, of course, but it’s what we do and is why government debt keeps rising. We borrow faster than we repay previous borrowing—and I mean governments everywhere, China as well as the US.
Our leaders have no real plan to reduce the debt, much less eliminate it. They just want to spend, spend, spend forevermore. And most citizens are okay with that. As I will note below, the Republican Party I grew up with, which back then seemed to constantly talk about deficits and debt, is now comfortable with 5% (and growing) of GDP deficits.
The government borrows more money than the actual growth of the economy. In other words, a dollar’s worth of debt no longer buys a dollar’s worth of growth, even by the government’s screwed-up definition of growth. From Chris Hamilton at economica.blogspot.com:
Since 2007, marketable federal debt has exploded by $12 trillion while Intragovernmental debt has risen a relatively gentle $2 trillion…all while the Federal Reserve directed Federal Funds Rate has been pushed to zero. And after a short respite from ZIRP, another push to ZIRP is almost surely in process, or even a furtherance, moving into NIRP and the paying of lenders to undertake loans. But why?
Pension funds are one bear market away from Armageddon. From Lance Roberts at realinvestmentadvice.com:
Fiscal responsibility is dead.
This past week, Trump announced he had reached an agreement with Congress to pass a continuing resolution which will suspend the debt ceiling until July 2021.
The good news is that it will ONLY increase spending by just $320 billion.
What a bargain, right?
It’s a lie.
That is just the “starting point” of proposed spending. Without a “debt ceiling” to constrain spending, the actual spending will be substantially higher.
However, the $320 billion is also deceiving because that is on top of the spending we have already committed. As I noted just recently:
“In 2018, the Federal Government spent $4.48 Trillion, which was equivalent to 22% of the nation’s entire nominal GDP. Of that total spending, ONLY $3.5 Trillion was financed by Federal revenues, and $986 billion was financed through debt.
In other words, if 75% of all expenditures is social welfare and interest on the debt, those payments required $3.36 Trillion of the $3.5 Trillion (or 96%) of revenue coming in.”
Do some math here.
The U.S. spent $986 billion more than it received in revenue in 2018, which is the overall “deficit.” If you just add the $320 billion to that number you are now running a $1.3 Trillion deficit.
Sure enough, this is precisely where I forecast we would be in December of 2017.
“Of course, the real question is how are you going to ‘pay for it?’ On the ‘fiscal’ side of the tax reform bill, without achieving accelerated rates of economic growth – ‘the debt will balloon.’
The reality, of course, is that is what will happen because there is absolutely NO historical evidence that cutting taxes, without offsetting cuts to spending, leads to stronger economic growth.”
Are the tables about to be turned on both the Russia collusion story and financial markets? From James Howard Kunstler at kunstler.com:
You had to wonder why it took Nancy Pelosi so long to figure out that maybe impeachment was not the big rock-candy mountain that, for “the resistance,” marked the gateway to a Trump-free nirvana. It became obvious this week, through the release of the Bruce Ohr and Lisa Page transcripts, that RussiaGate was birthed entirely by persons in the employ of Hillary Clintion, with then CIA Director John Brennan as midwife, and the DOJ / FBI avidly assisting — all of them fully aware that the predicate was false. What’s more, the evidence timeline makes it clear that Democratic Party leadership, including Nancy Pelosi, knew it was false. Hence, the pained smile she’s been wearing these many months.
In the event of an impeachment proceeding in the House, all that would be revealed, especially if it got as far as a trial in the US Senate, where the defense is allowed to mount a case under rules of evidence. Imagine the howls of embarrassment on late-night TV when even ex-comedian Stephen Colbert would have to admit that he was gulled into acting as a shill for a seditious con.
I suppose Ms. Pelosi also made the calculation that any impeachment ginned up by the likes of Jerrold Nadler and Maxine Waters would be superseded by a slew of actual indictments among the above-mentioned former law enforcement officialdom, including perhaps former Attorney General Loretta Lynch and persons in the Obama White House. You might even include the enigmatic Robert Mueller, who appears to be liable for the destruction of evidence in his own inquiry, as well as malicious prosecution.