- The Big, Beautiful, Bill becomes law…
- The benign path to ruin…
- Robert Kiyosaki’s latest book shows you the compounding power of weekly income…
Dear Reader,
On Friday — Independence Day — the president ran his presidential pen across congressional paper… and signed the Big, Beautiful Bill into law.
Thus he jubilated that:
- Our country has had so much to celebrate this Independence Day as we enter our 249th year. America’s winning, winning, winning like never before.
- We have officially made the Trump tax cuts permanent. That’s the largest tax cut in the history of our country. We’re setting all sorts of economic records right now, and that’s before this kicks in. After this kicks in, our country is going to be a rocket ship, economically.
It is my sincere hope that the fellow is correct. Yet I am not half so convinced that he is correct.
Reality Is Reality
I glance merely towards the nation’s debt-to-GDP ratio. It runs presently to some 124%.
Substantial evidence indicates that any ratio exceeding 90% is economically wreckful.
Like an overloaded pack mule… at 124% that economy is overburdened with debt… and cannot push along much.
It is exceedingly difficult to “grow out” of such debt. I am nearly tempted to say it is impossible to grow out of such debt.
The backwards gaze affords me the evidence.
Mr. David Stockman once directed Ronnie Reagan’s Office of Management and Budget. From whom:
- As of 1980, the rolling 10-year and 20-year real GDP growth rates stood at 3.2% per annum and 3.5% per annum, respectively…
- Owing to a slight boost from the good parts of Reaganomics — sweeping deregulation, tax rate cuts, and sound money, which were partially offset by the long-term ills owing to the abandonment of balanced budgets — the respective moving averages rose a tad to 3.5% and 3.6% per year by 1988, respectively…
- By the year 2000… the 10-year moving average of growth stood at 3.2%, exactly where it had posted in 1980…
- But… as of 2024, the true long-term economic weather vane — the 20-year moving average of real GDP growth — had fallen to just 2.0% or barely half the 1988 peak.
A Bad Combination
To what sinister forces does Mr. Stockman ascribe culpability?
You can pin the tail on the two negative legacies that emerged from Ronald Reagan’s eight years in the Oval Office. These were—
- the horrid money-printing, Keynesianized version of central banking monetary central planning inaugurated by Alan Greenspan.
- The Dick Cheney proclamation that Federal deficits don’t matter much, thereby putting a stake in whatever was left of the balance budget religion in the GOP after $950 billion of Reagan deficits over 1981-1988.
I hazard there is vast justice here.
The gold standard enforced a general spending discipline through 1971. Then old Nixon struck the constraints from Washington’s wrists.
Like the ancient sirens luring besotted sailors to the rocks… the temptation to spend money proved irresistible to Republicans.
Unlike Odysseus, they did not chain themselves to the mainmast.
Against the wrecking rocks Republicans went dashing. With them, the nation’s finances.
It Doesn’t Look Good
Mr. Stockman:
- Federal debt service costs on what will soon be $40 trillion of public debt will now rise by $700 billion per year in the face of even a 150 basis points rise in bond yields. And that happens to be the entirety of the Medicaid savings that the GOP RINOs are now fixing to gut…
- When interest rates notch up steadily higher even as the public debt climbs by $3 trillion per year, the GOP’s spending cut cupboard will be bare… having ruled out any cuts at all in Social Security, Medicare, Veterans, Defense, and interest payments or upwards of three-fourths of the budget…
- In a word, the once former GOP Watchdog of the Treasury is lost because it gave up the balanced budget axiom during Reagan’s times for the siren song of growing your way out of debt…
Yet a pall of inevitability hangs about the entire business.
As with most of life’s evils, no one intended it. No one planned it.
The Benign Path to Ruin
One compromise — a tactical yielding to the practical considerations of the moment — begets a second practical compromise… begets a third practical compromise… begets a fourth compromise… begets ultimately a 9,983rd practical compromise.
To undo one practical compromise is often plenty difficult. To undo the 9,983rd practical compromise is simply not possible.
Thus the path of least resistance becomes the infinite roadway — the infinitely reasonable roadway — to ruin.
That is how the nation in surplus becomes the nation sunk $37 trillion in debt.
What is more, the wastrels cloak their profligacy in high virtue. How?
The dollar of the United States is the world’s primary reserve currency. And so the world requires astounding quantities of dollars to grease the gears of its commerce.
Thus the inflationists can say the United States — selflessly and altruistically — must print dollars at preposterous rates to sustain the show.
It’s Our Global Duty!
“We do not run perpetual deficits because we are reckless spendthrifts. We run perpetual deficits for the world’s common good. We’re just enabling global trade!”
And so the corner drunkard argues in defense of his drunkenness. He argues his sobriety would bankrupt the local economy.
Is his ongoing addiction in the civic interest? Is ongoing addiction in his own interest?
The question is the answer.
I do not know if the Big, Beautiful Bill is truly in the civic interest.
When I say I do not know if it is truly in the civic interest — I mean it truly. I simply do not know.
It may be. It may not be.
The inscrutable gods will decide — and only the inscrutable gods will decide.
Do you trust their judgment?
Brian Maher
for Freedom Financial News
