We recently wrote Don’t Worry About The Debt Ceiling as a deal would inevitably get done as both sides want their pork. The spend-heavy Dems and GOP have reached a tentative debt ceiling deal. This means more fiscal spending that’s not tied to production/GDP, more fiscal deficits, more debt and more inflation. The inflation tax is most frustrating of all as it is a tax that Americans do not vote on. You can bet that the Fed will lower interest rates as our Debt will soon reach $35 Trillion and the associated interest expense will crowd out all other fiscal spending at the present 5% Fed Funds rate. If not after Labor Day, the Fed will certainly lower rates in 2024 – an Election Year.
The Federal Government has spent $3.6 Trillion fiscal year to date, which is an 8% increase over last year. One thing is for sure, even as the U.S. economy slows, Government spending will continue to grow – no matter what.
- For fiscal year 2022, 5 of the top 6 spending categories were welfare categories.
- 71% of total spending was across these top 5 welfare categories. That’s $4.45 Trillion in welfare spending. That money is not tied to productivity and only creates inflation and moral hazard.
- The Government generated $4.90 Trillion in tax revenue in 2022 (20% of GDP – too much!) and that was barely enough to pay the welfare bill.
On this Memorial Day weekend, remember that you my fellow Americans are the gift that keeps on giving. We are the collateral that underwrites the Fed’s printing press which supports the outrageous levels of fiscal spending. We are fiscal serfs. Our Government acts in its own best interest – not in the best interest of the American people.
What is the solution?
- End all welfare programs.
- Eliminate all income taxes (people and companies) and levy a national Sales tax on individuals and corporations.
- Take fiscal spending well below Revenue (this will not be difficult once welfare is eliminated – including corporate welfare in the form of Government subsidies across all industries).
- Put the U.S. Dollar back on the Gold standard.
- Make the Fed’s mandate to be singular in support of the U.S. Dollar – period. Employment, GDP, Inflation etc. is not the Fed’s problem. The fact is that if the Fed stops printing inflation will end. Don’t forget that the original definition of inflation was meant to describe the Fed growing the money supply. Happy Memorial Day.