“As President Joe Biden announced his budget for FY 2023, he said “My father had an expression.” Show me your budget so I can tell what you value.
How does Biden calculate the value of inflation at the exact moment we are experiencing it? This is the same type of spending by government that has already pushed prices to new heights.
It would seem that, with Covid declining, the debt increasing, and a tsunami of unfunded liability staring at us all, Biden would use the opportunity to drastically reset the federal government’s balance sheet. His budget plan might be called The Titanic’s Deck Chairs Rearranged.
President Trump wants to spend $5.8 Trillion, including a significant increase in spending on education and defense. He talks about levying a controversial—and probably unconstitutional—wealth tax on billionaires to help pay for it all but still expects a budget deficit of $1.2 trillion (see Table S1 in Summary Tables)! President Biden should at least use the money he’s going to be taxing unrealized capital gains.
Inflation is a result of debt-financed spending. Instead of cutting spending or reforming entitlements the government prints and borrows money to keep its citizens happy. The same quantity of goods is chased by more dollars, which leads to higher prices.
Meanwhile, at least a dozen states—including such far-flung places as California, Georgia, Hawaii, and Maine—are thinking about giving residents money to spend on things like gas, the price of which has gone through the roof. California governor Gavin Newsom said that “direct relief” will solve the problem we’re all trying to resolve. Gavin Newsom. “That is the problem of gas prices. Not only in our state but across the entire country.
Are you serious? To pay tax dollars for inflation pain relief is like drinking beer to get over a hangover. You’re only encouraging the next addiction.
Jerome Powell is the Federal Reserve Chairman. He has made a list of rate increases that will help to subdue inflation. But in recent speeches, he did not speak of an increase in the M2 money supply, which rose by 41 percent over two years. Nor has the Federal Reserve’s U.S.-issued debt. It has increased by $3.5 trillion in the same period.
Powell’s interest rates hikes won’t have much impact. Paul Volcker was the Fed Chairman in 1980. He allowed the Fed Funds Rate to More Than Double in Less than Two Years to Over 20 Percent. That helped stop inflation and caused the greatest recession since The Great Depression.
Worse, Fed serious increases today won’t just cause an economic downturn but will decimate the government’s balance sheet. This will require either huge tax hikes for everyone or massive reductions of government services.
The Congressional Budget Office has recently released conservative estimates that the interest cost on debt payments will rise as the federal budget increases. By 2050, it should account for around 24 cents of each dollar. That’s even assuming that historically low interest rates are maintained.
Moderate increases in the Fed Funds Rate would result in higher servicing costs, leading the government to borrow even more money. We are then back into economic despair.
Biden can talk a good game about “returning our fiscal house to order,” but it’s clear he doesn’t understand why prices are going up—and that his policies will keep them high for the foreseeable future. This could cost Democrats the House and Senate control in the fall, and possibly Biden the White House by 2024.
This will prove to be too costly for him and his party. His inability to deal with massive debt and spending will cost us all a lot more.
Photo Credits: Chris Kleponis – CNP / MEGA / Newscom; Frank Hoermann / SVEN SIMON/picture alliance / SVEN SIMON/Newscom; Paul Hennessy/ZUMA Press/Newscom; Karla Cot/ZUMAPRESS/Newscom; Tom Williams/CQ Roll Call/Newscoml Arnie Sachs/picture alliance / Consolidated/Newscom.
Music credit: Dark Fantasy, by IamDayLight via Artlist
Nick Gillespie wrote and narration. Regan Taylor edited.