Our debt problems accumulate.
Today, amid all the noise and distractions of Donald J. Trump’s impeachment, we return to the slo-mo financial calamity inching towards the U.S.
First, some context. Here’s what is happening:
The two main factions of the Deep State — Republicans and Democrats — are fighting for control of the government. The headlines tell us about every bomb thrown and missile launched in the impeachment proceedings.
Government is essentially a win-lose enterprise. Its internal battles — even when disguised as solemn rituals — are mostly to determine who gets ripped off by whom.
Most likely, the present drama will end in a draw. Mr. Trump will be impeached by the Democratic-controlled House…but not heaved over the side by the Republican-controlled Senate. And after the impeachment battle is over, the war will go on; it will simply shift to a new front — the 2020 elections.
Meanwhile…as the struggle for control of an empire intensifies, the real threats are ignored.
In the last quarter-century of the Roman Empire, for example, there was so much fighting among the Romans themselves, the empire couldn’t prepare a proper defense against the real enemy.
In 457, Majorian was proclaimed emperor and made a good effort to put things in order. But he was murdered by Ricimer. Then, Libius Severus ruled in name only, as Ricimer was in effective control. Anthemius claimed the imperial throne and married Ricimer’s daughter. But the two fell out. Ricimer besieged Rome, captured Anthemius, and had him executed.
The debt corpse
On and on…generals…emperors…pretenders…all fighting over what was soon to be a corpse.
America’s pulse has been weakening too — at least since the turn of the century. But what will bring it down? Barbarians? Mexican immigrants? The China trade war? Nope; the U.S. will go bust in the old-fashioned way, by spending more than it can afford.
As we reported last week, the federal government’s fiscal year ended only a few days ago. Hardly anyone noticed. But it ended badly:
WASHINGTON (AP) — The federal government, which ended the 2019 budget year with its largest deficit in seven years, began the new budget year with a deficit in October that was 33.8% bigger than a year ago as spending hit a record.
In that respect, the election of Donald J. Trump may have been a crucial milestone in the downhill run; it may have been the last chance to turn around.
The military/industrial/surveillance wing of the Deep State hasn’t seen any real challenge in more than a half-century. No president since John F. Kennedy has dared to oppose it. And the medical/retirement/education wing gains power steadily, as 10,000 baby boomers retire every day.
The coming decade is when these boomers are set to drain the Treasury. They will want more money to pay for hip replacements and heart transplants. And they will have the votes to make sure they get it.
But where will the money come from?
And here, we remind ourselves that the feds neither toil nor spin. That is, they don’t do hip replacements. And as far as we know, no central banker or politician has ever even lifted a patient onto a gurney.
There is no such thing as free money. They can pay for your hip replacement only by taking away time, resources, and output that belong to someone else and that have been earmarked for other things.
No way out of debt
And there’s no way to ‘print your way out’ or ‘inflate your way out’ of a debt trap. All you can do is to steal your way out — by taking real money away from real people.
If you’re going to inflate away the value of U.S. bonds, for example, you’re also going to inflate away the retirement hopes for all those people whose pensions depend on them. And if you’re going to ‘print’ money and pass it out to your crony friends, they’re going to use it to claim goods and services that belong to others.
One way or another, all debts are paid, even those that are considered unpayable.
Stick ’em with the bill
Naturally, the internal struggles get meaner and more vicious as different groups battle to see who gets stuck with the bill. And in all the chaos and infighting, almost everyone ends up poorer.
A Dear Reader, who studied Argentina in the ’70s and ’80s on behalf of the Ford Motor Company, writes: ‘I fear that our country is on a very dangerous path and is following in a similar path to Argentina!’
He may be right. Over the last 12 months, as a percent of GDP, the U.S. borrowed more than any other major developed nation. Even more than Argentina.
Down in the pampas, the country is running a deficit of about 4% of GDP. In the U.S., the ratio is 4.8%. And since the U.S. is still in an economic expansion, we can expect this deficit to at least double in the next downturn.
Step on the gas for more debt
When Donald J. Trump climbed into the driver’s seat, the old jalopy was already racing hell-for-leather towards bankruptcy. The windshield wipers were blowing off. The wheels were wobbling. And it would have required a determined, powerful, and masterful president to put the brakes on.
That was probably always too much to expect from Mr. Trump. But what did he do? He pushed down on the accelerator! Deficits grew larger. Spending went up.
The Donald handed out money all over town. Up and down K Street (where the lobbyists have their swanky offices)…over in Northern Virginia (home to the military/industrial/spook complex)…and up in Chevy Chase and Bethesda (where you can’t spill a latte without dripping it on a Deep State functionary of the medical/education/welfare genre).
Almost everybody in The Swamp got something. The ‘educators’ got a 64% raise in their department. The Commerce Department got a 15% boost. The military got $654 billion more. And the farm lobby got so much money, Federal Reserve chief Jerome Powell says it will amount to 40% of all farm profits this year.
And the debt is going through the roof. This administration has been adding debt at the rate of nearly $3 billion every day, for a total of $3 trillion since January 2017.