We were stunned. There, in the opinion pages of the Washington Post, last week was something we have not seen in any mainstream newspaper or journal.
This was so unusual… not an appeal for more wasteful spending or more futile bloodshed in the Levant or on the Steppes. Not a call for more spending for unwed mothers or ‘un-housed’ cat ladies. Not a plea to the feds for more free stuff… nor to the Fed for cheaper money. ‘More’ was not what it was about; it was about less.
For once… perhaps the first and last time… the Washington Post was talking sense:
‘The ‘Day the Dollar Died’ is coming. What’s the plan?
‘America is racing toward a fiscal apocalypse, unprepared for the serious social upheaval that could result.’
Of course, there is no plan. And the author of the Opinion piece, former Indiana governor, Mitch Daniels, didn’t pretend there was one. Instead, he looked ahead:
‘Since our national leaders, from both parties, have made the reckoning so probable, the least they can do is to start thinking about how to meet the fiscal judgment day when it arrives.’
When fiscal ‘judgement day’ arrives, it will be too late for planning. All they will be able to do is to react…and probably in the worst possible way — by printing money.
But there will be some decisions to be made — which assets to sell, which voters to stab in the back… how much to rip-off creditors… and how to explain ‘to an enraged public,’ how they got into such a mess.
To this last challenge we offer some advice: just look at the campaign proposals made in the 2024 presidential derby. Where is there any hint, suggestion or niggling soupcon about how to prevent the ‘fiscal apocalypse?’
Over at the Wall Street Journal, economist Jason Furman did some of our work for us. He looked at actual economic proposals made by the two candidates.
Both Republicans and Democrats favour a sovereign wealth fund…which would just transfer more power and money to the Wall Street and Washington elite. And both candidates favour lower Fed lending rates, another gift to the Wall Street elite.
Trump would like to cut back some of the energy boondoggles in the Biden Inflation Reduction Act. But by the time the lobbyists do their work, his proposals probably wouldn’t go anywhere.
Ms. Harris, meanwhile, has proposed a whole new set of giveaways — to home buyers… to students… to new parents, and so forth. She says these would be paid for by higher taxes on the wealthy, but the higher taxes probably won’t be approved.
Among the other suggestions: tax unrealised gains…un-tax tips…prohibit a Japanese company from acquiring US steel…penalise foreigners who try to protect themselves from heavy-handed sanction or dollar devaluation…stop price ‘gouging,’ etc.
The economist of the future has his work cut out for him. When it comes to wrecking the US economy, he will ask, was there a dime’s worth of difference between Trump and Harris? What if the other candidate had won; would things have turned out any different?
Furman points an accusing finger at Mr. Trump’s tariffs:
‘The Biden administration was wrong to keep and add to the tariffs Mr. Trump placed on China. Fortunately Ms. Harris doesn’t seem enthusiastic about pursuing this route much further. Mr. Trump, meanwhile, has proposed 10% tariffs on all U.S. imports, as well as 60% on Chinese goods. Whereas President Biden’s tariffs covered $18 billion of imports, Mr. Trump’s would cover $4 trillion, more than 200 times as much.’
And he concludes:
‘Economists are obliged to compare and quantify. In this race, the evaluation is clear: Mr. Trump’s ideas on tariffs, the budget and the Federal Reserve pose a much greater risk to the economy than Ms. Harris’s.’
Furman may be right or wrong. But the problem, as we see it, is bi-partisan. Even without the additional damage proposed by the two candidates, America’s government debt is projected to reach $65 trillion in 10 years… $150 trillion by 2050.
The candidates are like two drunken bus drivers, each racing to the same washed-out bridge. One may do a little better job of staying in his lane… but a few trillion, one way or the other, aren’t going to make much difference.
Regards,
 |
Bill Bonner,
For Fat Tail Daily
