Uncle Sam’s debt is getting “interest”ing

That which cannot go on forever, ceases:

Interest payments will make up 13 percent of the federal budget a decade from now, surpassing spending on Medicaid and defense.  Finding the money to pay investors who hold government debt will crimp other parts of the budget. In a decade, interest on the debt will eat up 13 percent of government spending, up from 6.6 percent in 2017.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

Some members of Congress want to set the stage for even more red ink. Republicans in the House want to make last year’s tax cuts permanent, instead of letting some of them expire at the end of 2025. That would reduce federal revenue by an additional $631 billion over 10 years, according to the Tax Policy Center.

Despite the tax cuts pushed by the Trump administration, the Federal government collected a record amount of tax revenue from October 2017 to August 2018. Washington doesn’t have an income problem. It has a spending problem.  Roughly a third of the Federal Budget in any given year is financed by borrowing money.  A family that ran its household budget that way would soon be bankrupt.  The Federal government has creative ways of masking its increasing insolvency, but it’s there nonetheless.  The spending spree of the past two decades was possible mainly due to low interest rates across the economy.  As the economic outlook in the U.S. turns upward, so will those interest rates.  A single percentage point increase equates to about $160 billion, given the official government debt of just shy of $16 trillion.  (Counting the ongoing raid of Social Security Funds — listed innocuously as “intragovernmental holdings” — the actual debt is over $20 trillion.)

In short, next year the government will spend close to $400 billion just to service the debt.  Not a penny of that amount will improve the infrastructure of our nation, modernize our military or provide services for our citizens.  It will simply go straight into the pockets of those who hold pieces of our country’s debt.

That debt has increased eight times faster than the government’s annual budget.  In 1981 — 37 short years ago, the U.S. debt hit $1 trillion for the first time.  That was an accumulation of more than two centuries.  In less than 40 years, that debt increased 1,600%.  The Federal budget over the same period increased from $1.9 trillion in 2015 dollars* to $3.8 trillion in 2015 — a “mere” doubling in spending.

We’ve been running like the cartoon coyote in thin air after leaving the cliff.  Gravity — in the form of normal historical interest rates — is about to kick in.

It will not be pretty.

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* People are so used to hearing about inflation, and the need to “adjust for it” when comparing years, that few stop to ask what drives it.  The standard explanation is that basic market economics causes it.  Not true — government deficit spending does.  By flooding the market with dollars to enable his spending sprees, Uncle Sam diminishes the value of each individual dollar.  It is, in effect, a “stealth tax” on the spending power of Americans.  The value of a U.S. dollar remained remarkably stable from 1787 to 1913, with a directly convertible exchange rate of $20 to an ounce of gold.  Only after creation of the Federal Reserve, which enables this gorging on debt, did that change.  As of this writing, one ounce of gold is worth about $1200.  That represents an 85% loss of dollar value in just over a century.

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This ‘n’ that

A few notes to hopefully provoke your thinking today:

I’ve thought for some time that our nation’s enemies use our desire for civility and decorum to handicap us in the culture war.  When the other side says “have you no decency,” it’s usually a dodge to avoid being accountable for their own actions.  It seems I’m not alone in thinking so:

…while appropriate restraint is always a part of this consideration, we go too far when we decide that we must always adhere to every aspect of a dying civility no matter the cost. Failing to openly defy the Left’s blatant aggression does not preserve civility — it only emboldens the uncivil and betrays their victims.

…civility is not a moral absolute and its form is always adjusting along with culture, it’s requirements are determined primarily by social contract — the kind of behavior we all implicitly or explicitly agree to when interacting with one another.   …when one party violates a contract, the other party is no longer bound by all of its terms. If you sign a contract to buy a car, and the dealer refuses to turn it over you, you aren’t “sinking to their level” by refusing to hand over your money. If you contract an employee who never shows up for work, you aren’t “repaying evil for evil” by withholding his wages. The same is true when dealing with people who are deliberately uncivil to civil people — it fundamentally changes what the rest of society owes them.

We need to stop taking the lazy road of “be civil though the heavens fall” and begin being deliberate about when to be civil — and when not to be.  For starters, I suggest the following guidelines…  (read the whole post here)

One of the biggest areas in which ‘civility’ and emotional blackmail is used against us is in the area of immigration.  So it’s nice to see the rest of the world COMBINED recently took in more refugees than the U.S. for the first time in 38 years.  Keep that little factoid handy for the next time your Leftist acquaintance decries the supposed ‘heartlessness’ of the U.S.

Leftists also demand expensive judicial proceedings for everyone who shows up on our borderlands, in order to accord them “due process rights.”  Turns out the Supreme Court has ruled consistently since the late 1800s that non-citizens are not entitled automatically to the same expensive access to our judicial system that citizens have.  Another handy note to have in countering our enemies’ talking points (and yes, I’m calling them enemies now.  Their actions show it’s an accurate term, whether using it is civil or not).

One reason the media are held in such contempt today is the realization they, too, have broken the social contract.  Presenting slanted information while claiming to be impartial is hardly being ‘civil.’  Yet the Associated Press seems to have done it again, trying to tug heartstrings by claiming the military is ‘discharging’ immigrants rather than allowing them to become citizens.  But it turns out there is more to this than the AP would have you know, including the fact that ‘discharge’ is not the appropriate word for someone who hasn’t even been to Basic Training yet.  But remember, kids, “fake news” is only a Trump laugh line…

Finally, for those of us who aren’t tired of winning yet, the economy is strengthening to the point labor is becoming in short supply — and hence, more valuable and lucrative.  Could it be that allowing thousands of people to flow into our nation unchecked each month helped depress wages for decades?  Inquiring minds should want to know…

“Are you better off than you were…?”

The famous question Ronald Reagan asked during the 1980 election season was “are you better off than you were four years ago?” It was a valid question then… and equally valid today. But let’s open the aperture a bit, and see where our political and economic leaders have led us over the past couple generations:

Only when we look at longer periods of time do we see the large impact inflation has on our ability to buy real goods and services. Since our middle class did not fully emerge until the end of World War II, it might be useful to compare the price of items back from 1950 to where things stand today. Has inflation had a big impact on our purchasing power? Let’s look at a few data points from 1950:

The average family income: $3,300
The average car cost: $1,510
The median home price: $7,354

These are three very important metrics when it comes to measuring purchasing power in the United States. The linked article goes on to calculate this meant in 1950 an average home cost 2.2 times one’s annual salary, and a car was 45% of it.

Expensive, yes, but not out of reach for those with the discipline to save for them.

Fast forward to 2014:

The average family income: $51,017
The average car cost: $31,252
The median home price: $188,900

Now a home costs 3.7 one’s annual salary — not quite double what it was sixty years earlier. A car costs 35% more, relative to one’s salary (61% from 45%).

Clearly, wages are not keeping pace with prices. Most of this is due to inflation, which has the effect of enriching those who get first access to “new money” (banks, corporations, etc) at the expense of everyone else. There are other factors, however, such as the impact of massive immigration (legal and illegal), which increases the size of the labor pool, thus depressing wages.

The common factor in all of this: public policy, which has promoted both inflation AND immigration as key tenets. It’s pretty clear that under the trajectory of the D.C. Empire, we are NOT ‘better off than we were’ several decades ago.

So what do we do about this? The only thing we can: demand an end to business as usual. NO INCUMBENTS, PLEASE!