Ready for the fiscal boom...?
IT'S HOT as blazes here in rural France, writes Bill Bonner in his Diary of a Rogue Economist.
The temperature will reach 101 today. Tomorrow, we're expecting 106. No one has air conditioning.
We spend the day in the dark, enjoying the relatively cool air of ancient buildings. At night, we fling open the shutters and windows...inviting in the night air. Day and night, fans move the air around.
There may be only a remnant of fiscal conservatives left in Congress. But those few still there must have felt a sharp blade in their backs last month.
The Washington Post:
"The White House and House Speaker Nancy Pelosi (D-Calif.) reached a tentative two-year budget deal Monday that would raise spending limits by $320 billion and suspend the federal debt ceiling until after the 2020 Presidential election."
The deal they just agreed on was such an abject surrender...such a cowardly rejection of their conservative principles...it makes one wonder, "Why did Republicans agree to such a thing?"
Republicans themselves didn't seem to know.
It's a "compromise," said David Perdue, R-GA.
"No comment," said Mitt Romney, R-UT.
"It was never the party of Paul Ryan," confirmed Newt Gingrich, former speaker of the House.
And today, it's the party of Donald J.Trump, who found les mots justes to describe the deal:
This was a real compromise in order to give another big victory to our Great Military and Vets!
The Pentagon may have had some setbacks in Korea, Vietnam, Iraq, and Afghanistan, but it sweeps the field in its most important fight – the battle for money.
Yes, Dear Reader, as expected, the White House and Congress struck a budget deal, proving that nothing will be allowed to get in the way of inflation. Not sequesters. Not debt ceilings. Not caution, prudence, nor good judgment.
The deal keeps the cash flowing to the military...and to domestic boondoggles, too. Federal spending this fiscal year will exceed last year by $420 billion. That is, spending is increasing at a 10% rate – which is three to four times more than GDP. And it leaves the deficit at about 5% of GDP, higher than Italy...or even Argentina.
And it also puts the US on course for $40 trillion in government debt by the end of the next decade...with 10% deficits.
That's what will happen when the next recession finally comes. Deficits and debt will explode as falling revenues and shovel-ready spending programs go wild.
Why did Republicans agree to such a thing? Stephen Moore, at The Hill, has his answer; we have ours. Here's Moore:
"First, because once again they have agreed to give Democrats virtually Dollar for Dollar what they want for social programs, in order to corral Democratic votes for more military expenditures. That is a bad compromise, and taxpayers are the losers. Second, my hunch is that, despite the sanctimonious rhetoric about balanced budgets, Republicans in Congress do not actually want to cut spending any more than Democrats do, so they did not put up a fight."
Our answer is simpler: Inflate or Die.
Politicians have learned that, politically, deficits don't matter.
Neither Republicans nor Democrats, neither Congress nor the White House, is worried about them. Consumer price inflation is low. Asset price inflation, they believe, is beautiful. And the public is no more concerned about the financial health of the nation than the politicians are.
Besides, politicians have got a new theory – Modern Monetary Theory (MMT) – that tells them they can spend as much as they want...as long as consumer prices aren't rising too much.
More important, the country needs more fake money, more fake interest rates, and more fake growth. Either you keep the money and credit flowing...or the bubble implodes.
Washington wants more boondoggles. Investors expect to see Dow 30,000 within months. And the public – always the last to understand what is going on – denies the evidence of its own eyes and ears and believes this is the "greatest economy ever."
All that matters now is keeping the jig going...the borrowing...the spending...and the fake boom.
Mr.Moore is right...the military and its crony contractors get more money (more about that, tomorrow). Students get to waste time at school at the public's expense. And millions of people all over the country are happy to cadge a little benefit from one or another of the feds' swinish programs.
But the taxpayers are the big losers.