It’s a Trap

‘Democrats are a party of America’s professional elites plus various interest groups. And given that Trump won a majority of blue-collar voters, they are no longer the natural home of the working class…The practical difficulty is that the party is shaped by elite professions, particularly law, government, media and academia. Such types often have a hard time concealing their distaste for those who voted for Trump. This is a poor starting point.’

–Ed Luce in the Financial Times

The deeper problem for the democrats is the one signaled by German Chancellor Merz: Their program is bankrupt…the economy doesn’t produce enough wealth to support their giveaway social programs and heavy economic regulation.

Since the days of Lyndon Johnson they have promised guns and butter. And in the days following Lyndon Johnson, 1971-2021, the fake dollar made it look as though they could afford them both. But debt rose. Growth slowed. And with the money running out, they turned to disguising the decay, like an aging dowager, hiding harsh truths under a veneer of botox and plaster. The result was hideous.

During the Biden Administration, we were meant to believe that the world would be a better place if we hooked up with a man from Addis Ababa…and pedaled to work after a meat-free breakfast. Federal employees were asked which pronouns they preferred. Bathroom policies became a battleground. And if a murder was committed by a member of a special group, the media was not permitted to say so…or be labelled ‘racist’ or ‘transphobic.’

Much of that cultural claptrap has been sucked down into the maelstrom of Trumpism…causing much wreckage…and leaving the democrats with nothing to offer other than not being Trump.

But Trump faces the same problem. The social spending continues…military spending increases. He can’t afford so many guns and so much butter either. And it will become a bigger problem as stagflation becomes more obvious. Here’s the latest from the OECD:

U.S. GDP Growth Expected to Plummet Amid Trade Policy Uncertainty

New trade policies are expected to slow American GDP growth from 2.8% to just 1.6% this year. Economic uncertainty and higher tariff rates are driving the projected decline, according to the latest OECD forecast.

And from Newsweek:

Falling lumber prices suggest there is trouble ahead for the struggling U.S. housing market, as builders scale back new construction because of a recent inventory glut and growing economic uncertainty.

After Trump exhausts his phony solutions — lower taxes, tariffs and interest rate cuts, all of which make the situation worse — he will be forced to choose. Guns or Butter?

Our guess is that he will choose guns, as Big Men tend to do. That is the real reason, the historic reason, for switching the Pentagon from defending the country…to making war.

Here in France, too, the Wall Street Journal describes a similar situation. Running out of money, President Macron — like Donald Trump in 2017 — hoped to boost revenues by stimulating the economy with tax cuts. The result:

Eight years later, the boom hasn’t arrived. And the yawning deficit created by those tax cuts is now fueling one of France’s most serious political crises of the postwar era, casting doubt on the future of his ambitions to unshackle the French economy.

Macron lost his second government in less than a year on Monday, after a no-confidence motion went against Prime Minister François Bayrou, who had proposed 44 billion euros in cuts to reduce the deficit, equivalent to $51.76 billion. Bayrou resigned on Tuesday.

Thanks largely to the EZ money era wrought by America’s funny money, the world’s reserve currency, feds everywhere spend too much money. Economies adapted to the cash flow. And now, the politicians are all in an ‘inflate or die’ trap. If they cut back, the bubble economy has a coronary and political careers go to the grave. And if they inflate…well…they get a few more years of Argentina, Venezuela…or the Weimar Republic, perhaps followed by re-armament and war.

And what about the great hope from the pampas — Javier Milei? He chose to let the bubble economy die. Rather than try to goose up revenues with more fake money stimulus, he told voters ‘we have no money,’ and cut spending, balanced the budget, and reduced inflation by 90%.

But the river of ‘something for nothing’ runs wide and deep. And the current runs swiftly through Buenos Aires province, where he just lost an important local election. If he loses the national election — in 2027 — he will mount the scaffold, the elites will go back to stripping the economy for their own benefit, and Argentina’s 70-year decline will continue.

More to come…