‘Half of all numbers are odd.’
–Bill Bonner
The news this morning. Bloomberg:
House Republican leaders struggled to find the final votes to advance Donald Trump’s massive tax and spending package, holding a key vote open for hours as the president and his allies worked to win them over but expressing confidence the legislation would eventually pass.
They’re counting the votes carefully. They need enough of them to pass the Big, Beautiful Budget Abomination (BBBA). But what kind of number is this? The number of votes in the House is specific, finite, and verifiable, like the number of fingers on your hand…or the number of dollars in your bank account.
If you say you have five fingers, you can hold up your hand to prove it. You can count out your fingers one by one. You will have five. Not four. Not three. Not 5.2. Not more or less five. Not an average of five.
Precise and clear — real numbers are essential to our modern world. If a train is set to leave at 3:15…there is no point in arriving at the station at 4. If the scales show you have gained ten pounds you are not going to celebrate a weight loss…and if you’ve pulled the pin on a hand-grenade and held it for three seconds, it’s time to toss it.
These real numbers are the sacred language of a win-win economy. They allow us to quantify, measure, and compare everything from time to the price of tomatoes. But like model airplane glue in the hands of a teenager, they are completely inappropriate — a kind of secular blasphemy— when used by politicians and statisticians. They need different numbers…ones that stretch, that bend…that prevaricate, estimate, hesitate, gesticulate, tergiversate…
They want numbers that wish and wash…that hum and fake it…numbers that shout lies, not those that calmly tell you the truth.
The numbers — unemployment, GDP, inflation etc. — that are used to set federal policies are not at all the same numbers used by aerospace engineers or coffee house clerks. Planes fly. Bridges stay where you put them. Water boils at 212 degrees fahrenheit. But the fed’s programs and proposals — full of fake numbers and decimals — rarely achieve anything close to their advertised goals.
Fake numbers lead to a phony economy, with fraudulent policies, chasing a mirage.
At least…that’s our hypothesis. And our mission for today is to rally to the defense of real numbers; it’s not their fault! The feds should be banned from using them.
For example, both political parties now promise ‘growth.’ And both parties intend to do it in the same three ways.
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First, spend more money.
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Second, change regulations to make it easier to “Get Sh*t Done.”
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Third, lower interest rates and taxes.
Republicans adopted the ‘supply side’ growth creed in the 1980s. Then Donald Trump tried to revive the magic of Reagan’s ‘Morning in America’ with his own supply side stimulus — a large tax cut. But since the ‘80s, growth rates have generally slipped. Donald Trump’s first term, for example, showed the slowest growth rates since the Great Depression. What did these numbers really mean? We’ll get to that.
Nor did cutting red tape or taxes noticeably increase growth rates. The Trump tax cuts are supposed to expire this year, but they are being extended…in order to boost GDP ‘growth.’
Unlike a proper group of rigid ‘5s’, and stiff ‘7s’, the feds’ growth numbers are slimy, slippery, and dangerous. Like a nest of vipers, it’s hard to tell where one misconception begins and another ends…any one of which might bite you.
GDP measures activity…not improvement, not betterment, not an increase in wealth. Government spending (including state and local) is around 30% of GDP. But we saw yesterday that any activity undertaken by government is likely to subtract wealth, not add to it. In order to add to wealth a product or service has to be something consumers are actually willing to pay for (which the feds don’t know…and don’t really care about). And the finished product has to be worth more than the sum of inputs that were required to produce it (which the feds can’t do).
Military spending, for example, may be occasionally necessary. But when the country faces no plausible adversaries…and no real risk to the homeland…what is it worth?
If competition were allowed, a smart dude like Elon Musk might offer a bare-bones version of national defense for only a fraction of the price. Then, by permitting people to ‘vote with their wallets,’ we’d get a real number. But for now, we can only guess.
As we saw in California, the feds lack the discipline and motivation to hold down costs. Amtrak, the Post Office, public housing, defense — whatever ‘good’ they offer will most likely be grossly overpriced…and produced at a loss. It will lead to scarcity, not abundance…and not to MAGA.
But it’s all included in GDP — every squirrelly number.
Stay tuned…we’ll look more closely at how the BBBA will help GDP go up — and make us all poorer.
Regards,
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Bill Bonner,
For The Daily Reckoning Australia
