"A Lot More Ruin"
by Bill Bonner
Baltimore, Maryland - "Of greatest interest to us among Donald Trump’s long list was his promise to balance the budget. “And in the near future, I want to do what has not been done in 24 years: balance the federal budget…We are going to balance it.” Many are the minor issues, imbecilities and annoyances of modern American government. But a $36 trillion debt is something else. If we don’t stop the smoke; we’ll see the flames later.
Mr. Trump can deport all the rapists and murderers he wants. He can seize the Panama Canal…or force us to speak English. But if he doesn’t get control of federal spending, and bring income in line with out-go, it will be wake-up time for the whole MAGA dream.
Which is not to say the world will come to an end. Nations flirt with bankruptcy for decades. They inflate. They issue junk bonds. They sell their gold, neglect their highways and auction off their national parks. The dollar has lost 85% of its value since 1971. So, there’s still 15% left. “There is a lot of ruin in a nation,” said Keynes. Today, we look to see how the ruin might be avoided.
A conventional politician, such as Joe Biden, wouldn’t have a chance. Working through the myriad parasites in Washington and Wall Street, every initiative to cut spending… reduce the federal payroll…or bring the US back to basics, would be endlessly and hopelessly blocked. Biden followed along on the course set by his predecessors (including Donald Trump himself) and the elites. That course leads to the two worst things that can happen to a mature empire - bankruptcy and war.
Big Man governments may or may not be better suited to avoiding them. So far, there is little sign of a major course correction. In the key policies - fiscal and military - Trump II looks little different from previous administrations. But it would be nice to be surprised. After all, the Big Man can do what the democrat can’t. He doesn’t need to consult members of congress (whom he knows to be in the pockets of various lobbies). He doesn’t worry about hurting feelings or retirement plans at the FTC, FBI or SEC. He doesn’t bother to follow the Constitution too closely either; some inner voice tells him what needs to be done. And he is a ‘get it done’ kind of guy. In a hurry. Decisive.
But there’s a problem at the heart of Big Man government. The US economy includes more than 330 million people. Each one of them has goals of his own…and wishes to use his time and money in pursuit of them. Any diversion - whether it is invading Mexico or getting deported to Mexico - takes time and resources away from him in order to implement the Big Man’s agenda. So, the more energetically the Big Man asserts himself, the less the masses get what they want.
But wait…what if reducing the feds’ interference and balancing the budget were key elements of the Big Man’s agenda? What if the Big Man sought to be big by making the federal government less big? The idea is dazzling…intriguing…and probably nonsense. But lets take a look.
The Committee for a Responsible Federal Budget has already done the math. As it stands today, the US debt is set to grow by $18 trillion over the next ten years. And that assumes that nothing bad happens - no crises, no bailouts, no recessions, no stimmies. The Congressional Budget Office, meanwhile, puts the estimate at $23.9 trillion. Neither of those numbers include the extension of Trump’s 2017 tax cuts, which are expected to add $4.6 trillion to the debt. Uh oh… there’s more. The Kansas City Star:
1: “And the next phase of our plan to deliver the greatest economy in history is for this Congress to pass tax cuts for everybody,” he said. The cost of the tax cuts already in his budget passed by Congress $4,600,000,000,000.
2: “No tax on tips,” he said. Cost: $107,000,000,000.
3: “No tax on overtime,” he said. Cost: $866,000,000,000.
4: “No tax on Social Security benefits for our great seniors,” he said. Cost: $1,500,000,000,000.
5: “I also want to make interest payments on car loans tax deductible,” he said. Cost: $173,000,000,000.
6: “We want to cut taxes on domestic production and all manufacturing,” He said. Cost: $250,000,000,000.
7: “We will provide 100% expensing,” he said. Cost: $100,000,000,000.
Wait a minute. These are tax cuts. How could they increase the amount squandered by the feds? Alas, Elon has spelled it out. “All federal spending is taxation,” said the Great One. And he’s right.
The direct cost of government is what it spends, not what it subjects to income taxes; it will get the money one way or another. These tax cuts - with no corresponding budget cuts - will increase the debt…eventually to be paid via inflation, default, tariffs or some other underhanded levy. The total cost of all these tax cuts (including the aforementioned 2017 cuts) comes to $7.6 trillion…and brings the total ten-year debt increase to around $30 trillion…with US debt going over $60 trillion sometime over the next ten years. At that level, the interest alone would be more than all the tax receipts from California to the Mississippi River. And that’s if ‘nothing bad happens.’ How likely is that?"
