One notable feature of the American political environment is the lack of consensus about what the facts are and how the economy should be allowed to function. Should it be a non-interference, laissez-faire economy? Should there be more regulatory intervention?
Many politicians talk about free markets when they think it will help them get votes. But research over the past 100 years has shown that big government has always been the solution of choice.
President-elect Trump is pursuing policies that do both. He wants to deregulate and cut spending. But he also wants to maintain Social Security, increase defense spending and impose significant trade tariffs on foreign imports.
The simple fact is that you can’t have your cake and eat it both. Once you have it, it’s already gone. There was nothing left to eat.
This reality is why DOGE brothers Elon Musk and Vivek Ramaswamy are having a hard time cutting $2 trillion from the budget. This cannot be accomplished without support for transfer funds and defense expenses.
Nonetheless, reducing the size of government is a noble cause and one that should be actively pursued. Moreover, we believe that Musk and Ramaswamy need to think bigger.
We want to see federal spending come down as a percentage of the economy. 10%. It was a place just before World War II. Currently it is around 22%.
Achieving this would therefore require cutting government spending by about 55%, which equates to a spending reduction of roughly $3.71 trillion. in Fiscal Year 2024Total revenues were $4.92 trillion and total expenditures were $6.75 trillion.
A 55% ($3.71 trillion) cut in spending of $6.75 trillion would reduce the annual budget to $3.4 trillion. Collecting $4.92 trillion in receipts would leave a surplus of $1.88 trillion, which could be used to repay the national debt. At this rate, the national debt of $36 trillion can be paid off within 20 years.
generous gift
To get from here to there, you have to do the unthinkable. This would require reducing Social Security and Medicare commitments and cutting defense spending. This is not a popular option at all. No one on either side wants to consider this. Our readers send us nasty grams every time we highlight these unpleasant realities.
Still, arithmetic is arithmetic. We can’t change that. Because that’s the reality of how the world works. It predates the invention of numbers. In fact, numbers are just a way to describe these immutable facts. Neither new mathematics nor communist propaganda can make 2 + 2 = 5. That’s impossible.
As Musk and Ramaswamy have said, cutting $2 trillion in spending (the $3.71 trillion we’d like to see) without cutting Social Security and Medicare commitments and defense spending is hopeless. We don’t like it one bit. But this promise should never have been made in the first place. Therefore, the military-industrial complex must not grow to its current state of obesity.
The following quote is from an unknown Scotsman of the 18th and early 19th century named Alexander Fraser Tytler. Although there is no direct record of Tytler saying the following, the sentiment is significant:
“Democracy by its very nature is always temporary. It cannot exist as a permanent form of government. Democracy will continue to exist until voters discover that they can vote for themselves with generous gifts from the public treasury. From that moment on, the majority always votes for the candidate who promises the most benefit to the treasury, with the result that all democracies eventually collapse due to loose fiscal policies, and dictatorships always follow.”
Questions about democracy, defense spending, direct payments, and currency devaluation policies are intertwined. Here’s why…
shortening
Extreme currency depreciation during the coronavirus frenzy has triggered a massive surge in consumer price inflation. within a short time M2 Money Supply – A broad measure of money supply, including cash, checking accounts and short-term savings accounts – increased by more than $6 trillion.
To finance this promiscuity of new money, the Federal Reserve created credit out of thin air and poured it into Treasury bonds. Specifically, the Federal Reserve’s balance sheet It surged by about $5 trillion between January 2020 and mid-2022. It has fallen slightly since mid-2022. But before 2020, there was none at all.
This week’s CPI report showed consumer prices rose at an annual rate of 2.7% in November. This is on top of a 22% increase since March 2020, when government shutdowns were ordered and massive money printing was implemented.
To curb consumer price inflation, government spending must be reduced. Unfortunately, this means scaling back the promises we owe to the American people. The country cannot afford it. And the alternative to continued money printing is creating continued consumer price inflation.
Republicans and Democrats appear equally inconsistent on issues of government spending and currency debasement. Over the past 100 years, from Guinness Extra Stout to cheap 3.2 beers, there has been a dilution of a kind of guiding philosophy. The value of the dollar has also been diluted in kind.
For that matter, the public can’t get the story straight either. Government needs and desires always change with the direction of the wind. Nevertheless, we suspect that these conflicting demands will be considered during the next credit crisis and economic collapse.
13 Evaluation of the United States
For meditative purposes, the following is a partial list (there are 13 of them) of the reckonings for America that are now lost in a state of suspended animation.
- Everyone calls for a smaller government, as long as entitlement payments are not restricted.
- Everyone distrusts the government until the economy shrinks and a federal bailout with cheap interest is needed.
- Everyone says they support free trade before (not after) their jobs are moved overseas to China or Vietnam.
- Everyone disparages Made in China products, unless you can get them at Walmart or Costco for cheap prices every day.
- Everyone wants safe, state-of-the-art infrastructure without raising taxes.
- Everyone despises inflation, except when it causes inflated stock portfolios or home prices.
- Everyone laughs at the ills of government deficits until they are faced with the prospect of fiscal austerity.
- Everyone would prefer a trade war, as long as the prices of flat-screen TVs and iPhones don’t go up.
- Everyone loves green energy, but not in their backyard.
- Everyone believes in universal health care before (not after) seeing a specialist.
- Everyone loves cheap credit, but only to the extent that it causes mass debt defaults.
- Everyone loves government-sponsored medicine, until your family, friends, and neighbors start dying from it.
- Everyone wants this, but they also want it. Even if it’s someone else’s money… And so on.
The point is that when everyone goes bankrupt and the economy stagnates, citizens and politicians will scream in unison. They will make demands on the government. ‘Do something.’ The cries and screams will grow louder until the moment the fake currency system dies and democracy collapses into dictatorship.
After that, things will get especially worse.
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minnesota gordon
for economic prism
A return to the economic prism in 13 assessments of America
