Off to the Poorhouse We Go!
America's finances continue to deteriorate... but whose to blame?
Bill Bonner, reckoning today from Paris, France...
“The last administration alone — the last guy who served in this office for four years — increased the total national debt by 40 percent in just four years.”
— Joe Biden, remarks on the national debt ceiling in Valhalla, N.Y., May 10
Fox News leads off:
The U.S. national debt has increased by $1 trillion in the five weeks since President Biden signed a bill into law that effectively turns off the debt ceiling until 2025.
On June 3, however, Biden signed legislation reflecting negotiations with House Republicans that requires a small spending cut next year and allows unlimited federal borrowing until 2025. With no debt ceiling in effect, federal borrowing jumped more than $350 billion in a single day and crossed the $32 trillion mark in less than two weeks.
Whee! It’s hi-ho…and off to the poorhouse we go!
A Dereliction of Duty
And who’s to blame? Donald Trump, who cut taxes and increased spending more than any president in history? Or Lyndon Johnson, who set the stage for America’s rush to bankruptcy with his ‘guns and butter’ programs – a war in Vietnam and the Great Society at home.
Or was it Ronald Reagan? Or Barack Obama?
Or all those clowns in the House of Representatives who are supposed to be watching over our money?
They dropped the ball. The Constitution gave them the “power of the purse.” But they’ve been derelict in their duty to protect the finances of the US government. And now, here’s the Committee for a Responsible Federal Budget:
…federal spending as a percentage of Gross Domestic Product (GDP) will grow to 29.1 percent over the next three decades. Driving a large part of that growth is spending on interest payments to service the national debt.
Net interest payments hit a nominal dollar record of $475 billion in Fiscal Year (FY) 2022 and will nearly triple by FY 2033 to $1.4 trillion, growing to $2.7 trillion by 2043 and to $5.4 trillion by 2053. As a share of the economy, net interest will rise from 1.9 percent of GDP in FY 2022 to hit a record 3.2 percent by 2030 and more than double to 6.7 percent by 2053.
By 2051, spending on interest will be the single largest line item in the federal budget, surpassing Social Security, Medicare, Medicaid, and all other mandatory and discretionary spending programs.
Late, Degenerate Empire
Wait. Is this something to worry about?
Nah…it’s just business as usual. That is, it’s the business of a late, degenerate empire, squandering its most precious assets while desperately trying to ruin itself with the two sure-fire death-dealers – inflation and war.
And who complains? Who sounds the alarm? The media…hardly a word. Congress…where have they been; isn’t it their job to make sure this doesn’t happen? The public? The voters? The bankers? The Fed?
Nah…nobody really cares. Because, everyone knows where this train is headed, and nobody wants to stop it. Instead, they want to get what they can, while they can. Buy Nvidia…beat Russia… stop China…and make sure we use the right pronouns…recycle our trash…and, by all means, don’t doff our hats and hang our heads when Stonewall Jackson’s name is mentioned.
Rick Rule interviewed us yesterday for his upcoming conference in Florida. (See note below for more info…) He asked an interesting question.
Could we be wrong, he wanted to know?
“Maybe, despite all our worries and criticisms of the powers-that-be…and all the theoretical effects of debt, money printing, deficits, bad trade policies and dumb governments… despite the approaching bankruptcy of the US government…and the decline and fall of the American empire…
…maybe it won’t happen.
Maybe people will invent new technologies…new industries…and new ways of doing things…And those new things will overpower the dead, destructive weight of the political class.
Our reply:
Yes, of course people will invent new things. We’ll have new movies. New books. New apps. New gadgets. And some of them will be commercial successes. Some stocks will go up. Some people will make money. And won’t that be nice?
But there are forces of history…boom and bust…rise and fall…birth and death. These ‘megapolitical’ trends will be decorated and enlivened by people who invent things, and try to reform the system, but the deep currents of history won’t stop.
There are always two opposite forces at work. One leads us forward – with win-win deals, aggregated in free markets, that lead to new wealth and civilized progress. But the other pulls us back to barbarism…with politics, violence, fraud – and win-lose deals that make us poorer.
If we’re right…the win-losers now have the upper hand. They are tightening their grip…on the press…on our thoughts and on our money…on trade…on just about everything. And while they haven’t totally let slip the dogs of war…they are clearly headed for the kennel.
Are we wrong about this? We hope so.
Regards,
Bill Bonner
Joel’s Note: Both Bill and our resident macro analyst, Dan Denning, will be contributing to Rick Rule’s Natural resource Conference in Boca Raton, Florida… Bill, virtually, and Dan, in person.
You can still grab tickets to the event – either in person, if you fancy the journey… or with a Livestream/On Demand pass, if that’s more your speed.
The event itself will take place from July 23-27 down in Florida, but the online content – including all the presentations, workshops, panel discussions and fireside chats – will be available to view in real time and on-demand until the end of the year.
The Livestream/On Demand pass also comes with a few other bells and whistles, including an exclusive Event App, called All In The Loop, which you can use on your phone or computer for quick, easy access to any of the featured presentations…plus access to the Virtual Sponsor Booths and One-on-One Meetings, in which pass holders will be able to set up one-on-one meetings during the live event with any of the sponsors or even other attendees.
Again, lots of good stuff… both in person and through the Livestream/On Demand pass. The event itself lasts through July 25-27. For more information, see here…
N.B: Please note that registration closes in just 11 days…
To answer the question, "Where did we go wrong?", one must presume that there was a right way, or that the system could work. I'm not convinced the presumption is valid, but if it is, where we "went wrong" was by thinking that once we had voted in our representatives we were then fully absolved of any further input or accountability. Self-rule is a 24/7/365 job, but we let ourselves off the hook for the sake of convenience. Our "elected" representatives are foolish, self-deluding people such as we, right? We would have had to sit on them day and night. Delegation is meaningless without accountability. Best always. PM
There are two sides in America now. We have always had two political parties but for most of our history there were more than two sides. On any given issue there might have been three sides or maybe a dozen. That is what you get with a functioning First Amendment and a free press. Both are gone.
Now you are either on the government’s side or you are not. If you are not you had best keep quiet about it.
In 1861 Abraham Lincoln wrote in his diary: “Both sides could be wrong, but both sides cannot be right.” The more polarized any topic or society becomes the more Lincoln’s statement is thrown into stark relief. He was confident in his side.