Imagine stealing everyone’s money and still being $36 trillion in debt.
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Category: deficits and debt
The rich…
Trump’s riding high, in the first week of his second term — but not regarding the biggest problem he faces, inflation and economic instability.
“When bondholders don’t see a credible fiscal path to be repaid for current and future government debt,” writes Veronique de Rugy at Reason, “they expect that eventually the central bank will create new money to buy those government bonds, leading to higher inflation.
“Recent inflation wasn’t just about money supply; it reflected the market’s adjustment to unsustainable fiscal policy.”
Winning, for Trump, cannot equate to Spending.
While Ms. de Rugy tries to explain this all in terms of a big-picture economic analysis, she does not quite reach back in time far enough. We had stagflation way back when I was young. It was cured then not by decreased spending but by Paul Volcker of the Federal Reserve putting the brakes on money-and-credit expansion. He stopped inflation.
A pure recession immediately followed, followed by recovery in the new administration, Ronald Reagan’s, who helped reduce the rate of growth of government (and not much else).
Inflation could, theoretically, be handled by the Fed alone, now, as then.
Except — the federal government can hardly now afford to service existing debt, which would skyrocket with the nitty-gritty of the Fed’s cure, higher interest rates.
Today, debt service (paying just the interest) approaches One Trillion Per Annum.
“A crucial tipping point was reached in 2024 when the interest expense on the federal debt exceeded the defense budget for the first time,” Nick Giambruno summarizes at The International Man. “It’s on track to exceed Social Security and become the BIGGEST item in the federal budget.”
Increasing it yet more would cripple the government.
The only way out, if there is one, is a radical decrease in spending and deficits, as de Rugy advises. Trump’s path to success is somehow accomplishing that.
This is Common Sense. I’m Paul Jacob.
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The current president of Argentina is an avowed “anarcho-capitalist.” He isn’t really — but close enough for government work.
It’s more accurate to say that Javier Milei is a capitalist and libertarian. He has taken on the job of extricating the Argentinian economy from the mire of socialism and corruption — unleashing outlawed
He seeks to do it not by pushing for micro-changes around the edges of the margins of government spending and intrusions but by figuratively wielding the chainsaw that he literally wielded during his
One sign of the success of his “shock therapy” cited by The New York Sun is the “first budget surplus in more than a decade.” A monthly surplus of almost $600 million is the first surplus since the summer of 2012.
But, the Sun quickly adds, Milei’s various radical proposals still face an uphill battle in the legislature. All those people who created the mire are still around.
There are hopeful signs. The lower chamber has already passed a preliminary or framework agreement to make various basic reforms. These include privatizing of currently state-operated companies, deregulation, and revamping of criminal and environmental laws.
The lawmakers “chose to end the privileges of the caste and the corporate republic, in favor of the people,”
Meanwhile, though, egged on by unions, thousands of Argentinians have taken to the streets in a general strike to protest the reforms. Milei can win, but it won’t
This is Common Sense. I’m Paul Jacob.
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“We have the highest share of working-age Americans in the workforce in 20 years,” Biden recently told reporters. “It’s no accident. It’s Bidenomics.”
Bidenomics being that old standby, tax-and-spend-omics.
So why do so many Americans think the economy is getting worse? Why do 84 percent say that their costs have gone up?
Well, says President Biden, the media mislead them. “You all are not the happiest people in the world [in] what you report,” is his view. “You get more legs when you’re reporting something that’s negative.”
The media do often mislead us; the negative news bias is real.
But I don’t think that our left-leaning, in-the-tank-for-Biden media can be blamed for the impression so many of us have that it’s harder to make ends meet.
Biden isn’t the only one professing puzzlement. Breitbart Business Digest observes that a “small army of establishment media types and economists” are intent on “unraveling what they take to be the great mysteries of our time.” As described by a recent Brookings Institution paper, this mystery is the “disconnect between consumer sentiment and the state of the macroeconomy.”
As BBD points out, the Brookings researchers simply start by assuming that everybody is wrong, then try to figure out why.
“A simpler explanation would be that the economy is falling short of the public’s expectations” because of things like high inflation, higher interest rates, and greater difficulty paying for groceries, Christmas presents, vacations. And rent, and medical bills, and tuition.
Saying it’s all in our heads won’t make tough times go away.
This is Common Sense. I’m Paul Jacob.
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“By law, we have one job,” Rep. Tim Burchett (R‑Tenn.) asserted the last time he opposed the “continuing resolution” (CR) on the federal budget.
What is that “one job”? It is “to pass twelve appropriations bills and a budget. We aren’t doing that, which is why we are $33 trillion in debt.”
Katherine Mangu-Ward, at Reason, fleshed this out: “In theory, the president proposes a budget, Congress passes a budget resolution, and then various committees put together a dozen separate spending bills. They’re debated and voted on, and then the president signs them into law by October 1.”
The practice, however, is a bit different: “What happens instead is that the members of the House careen into each fall full tilt, screaming at each other until they throw together some kind of stopgap measure to fund the federal government for a little while longer until they can get their act together to generate a big, messy omnibus bill that no one will have time to read.”
But it’s worse: “When they can’t manage even that, we get a shutdown.”
To prevent a shutdown, but also not fall back into the usual iterations of the continuing resolutions, the new House Speaker, Rep. Mike Johnson (R.-La.) has floated the idea of a “laddered” CR. According to The Epoch Times, this plan “would spread the due dates over a period of time rather than having all the bills come due at once.” Think of it as an ultra-weak echo of the responsible budgeting process.
Will it work? Will Congress manage this merest hint of responsibility?
In ten days, it’s go time — or, no-go time — again.
This is Common Sense. I’m Paul Jacob.
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