We Can’t Afford It!
The depiction “spending like a drunken sailor” doesn’t adequately describe Washington the last 20 years. The phrase was created over a 100 years ago when sailors returned from months at sea and tended to overtreat themselves. But when they ran out of money, they had to stop.
Not so with our federal government. It now doesn’t stop when it runs out of money, it just ‘prints’ more.
The last year and a half our federal government has spent additional trillions on programs labeled as COVID relief, and we saw our national debt jump into the mesosphere from an already stratospheric level. It has spent $6.55T in fiscal 2019-20-21 – on an already deficit laden budgets of $4.12T.
The President’s “infrastructure” plan was tied up in the Senate for two reasons. One, it attempted to expand the definition of infrastructure to things that are not. Two, the plan funded over $1T of the proposed $2T for such things as construction and/or rehabilitation of 500,000 homes, money for caregivers, expanded Medicaid, electric vehicles, 500,000 electric charging stations, and semiconductor research.
We do need attention given to such things as highways, bridges and airports. I’m not sure the $85B for Amtrak fits.
In any case, once again, what it’s called is much more than what is normally called infrastructure. We can’t afford it!
Now comes President Biden’s 2021-22 fiscal year budget proposal – a whopping $6T.
If approved as is, it’s estimated to add an additional $10T to our current $29T debt over the next ten years. That’s without a war or some other real ‘crisis’ during that time. You know what that means – it’s underestimated. As of today, the reported national debt of $29T does not include the $6T which the government itself bought and is holding – not sold to the public. We owe it just the same.
And since the government uses cash accounting (vs. accrual), the current debt also does not include any governmental liabilities for pensions and health insurance guaranteed to current and former, vested employees upon their leaving/retirement.
Federal budgets are broken into two major categories: mandatory and discretionary. Mandatory spending is not appropriated by Congress. It’s for programs like Social Security, Medicare and food stamps (SNAPS) – meaning if people are eligible for something, it’s automatically spent, regardless. Mandatory spending in the 2020-21 budget represented 38.5% of the budget. Mandatory expenses are estimated at $2.966T last year – and with an aging population and more healthcare, the CBO is estimating those expenses will exceed $4.3T in 2027. The eligibility age for Social Security needs to be raised, but that issue is for another time.
The proposed budget increases taxes for 60% of taxpayers – more for those earning more than $200K – and raises the corporate income tax from 21 to 28%. It’s a moot point because the accumulated increase in revenue as a result doesn’t come close to covering the proposed increase in spending. The increased taxes could, however, negatively impact the number and quality of jobs due to lost private investment – and decreased spending by taxpayers. I add here that nearly 50% of the adults in the country – an estimated 77.5 million households – currently pay no income tax.
I could easily fill the rest of this space plus ten other blogs to summarize the 66 pages of the President’s 2021-22 budget proposal.
I can summarize the expansions of programming and spending outlined in one simple sentence. We can’t afford it!
But I will say there’s more than the bloated numbers to the budget. It’s socialistic. It would trap even more people in poverty, dependency, low self-esteem, and unhappiness.
We’re on the path followed by Hugo Chavez in Venezuela – which still has the largest oil reserves in the world. Once the world’s 4th largest economy – not so long ago – it currently has 90% of its population living in poverty. Minimum wages are immaterial in the face of hyperinflation. Here are some staggering numbers. In 2014, the annual inflation rate reached 69%, the highest in the world. In 2015, the inflation rate was 181%, again the highest in the world and the highest in the country’s history at the time. The rate reached 800% in 2016, over 4,000% in 2017, 1,700,000% in 2018, and reaching 2,000,000% in 2019. The Central Bank of Venezuela officially estimates that the inflation rate increased 53,798,500% between 2016 and 2019.
How did Chavez and the current President-for-life, Maduro, accomplish this amazing result? Chavez had what he thought was a new idea for socialism – Democratic socialism. He nationalized the oil industry and all the power generating plants, food/agriculture, banks/finance, steel, telecommunications and transportation, set minimum wages so every worker could enjoy their piece of Utopia and had his family and supporters “elected” to its Congress. After doing that with some minimal protesting, he set the prices for all the basic essentials. What a wonderful, caring leader! Government controlled everything, including the market for goods and services, the media and the printing and spending of money. Therefore – as the ideology goes – made everything fair and equitable for all the people. We see how well his twist on socialism worked. (Just reread the previous paragraph.)
As the US keeps spending itself toward bankruptcy, currently racking up 120% of GDP in debt with no end in sight, we have a future that could make us look very much like Venezuela.
Does anything more need saying than “We Can’t Afford It!”
Period.
***************
Have a great and prosperous week.
Hug somebody.
References:
https://www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf
https://www.pgpf.org/national-debt-clock
https://www.thebalance.com/current-federal-mandatory-spending-3305772
https://borgenproject.org/top-10-facts-about-poverty-in-venezuela/
https://www.reuters.com/article/us-venezuela-election-nationalizations-idUSBRE89701X20121008
SPIDER Bites
A federal judge enjoined Florida’s new law, set to go into effect Thursday, which requires social media companies to publish standards with detailed definitions of when someone is to be censored or blocked – and makes Twitter, Facebook and other online companies subject to as much as $250,000 daily fines for de-platforming a Florida candidate. The judge cited free speech of the media as the reason. I don’t think the decision will be upheld on appeal. It’s become a political issue for both the legislature, the governor and the judge. Level heads would say social media companies put themselves out there as public platforms but have initiated private agendas. You can’t have it both ways.
A 6-3 decision by Supreme Court last week upheld the AZ voting law disallowing the harvesting of ballots and dropping ballots off or voting at unassigned precincts. The majority opinion makes the laws passed in other states, including FL, restricting those activities are likely to stand as well. The court noted the plaintiff, the DNC, showed no statistical evidence that the law would have a disparate impact on minorities. Has any talking head heard of absentee voting for people who can’t get to their voting place? BTW, NYC has a ranked voting system for its primaries now. It might be worth a blog at some point. Two weeks after its 6/22 mayoral primary they still don’t have the results and report a possible 135,000 fraudulent votes. Its idea is asinine.
CA has set the date of September 14 for the recall election of Gov. Newsom.
Federal Reserve Chair Jerome Powell has his work cut out for him. The current scenario in the post-pandemic economy is seeing consumer spending and demand rising, driving up prices. At the same time many folks have been hesitant to go (back) to work resulting in employers raising wages (some giving bonuses) to entice workers. Both scenarios raise the expectation of inflation. And when expected inflation is high, workers demand larger wage increases. Employers acquiesce, expecting that they can pass higher costs on to consumers. As a result, high expected inflation leads to rapid cost escalation, which in turn leads to high actual inflation. A dog chasing its tail. The Fed needs to slow it down as Congress has been on a spending binge as well.
Looking at the current state of the downsized “infrastructure bill,” many Democrats are unhappy that it doesn’t spend enough on things that are not infrastructure. One of the more disturbing sections to me – still in the bill – is the one where the federal government would take over the zoning for municipalities and counties. Infrastructure? This is a revival of the move made in 2015 by HUD to require local governments to comply with bureaucratic mandates showing their communities were becoming more ‘diverse.’ That move threatened the removal of federal grants for housing. This time that threat is repeated but adds the threat of loss of money from the Transportation Dept. for roads. Who wants federal bureaucrats running their neighborhood and community? (See 11/22/20 blog titled: https://spiderinstitute.com/affirmatively-furthering-fair-housing/ if you’d like to be reminded.) “Power corrupts, …”
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