Reason | Jan 22, 2021 | 0
Are the Welfare-Warfare Chickens Coming Home to Roost?
Do you remember that big multi-trillion-dollar “stimulus” package that Congress enacted last spring and that President Trump signed into law? Do you remember how mainstream statists were proudly proclaiming how good and beneficent the federal government is? Do you remember they were saying that the stimulus checks were “free” money being sent to people by the federal government? Do you remember those letters sent out by President Trump making it look like he was the one responsible for sending all this “free” money to American voters?
This week, the Congressional Budget Office said that “the federal budget deficit is projected to hit $3.3 trillion.”
Why is that significant?
Well, for one thing before the coronavirus crisis, the federal deficit for this fiscal year was going to be “only” $1 trillion. Now it’s projected to be $3.3 trillion.
That means that the federal government is spending 3.3 trillion more than what it is bringing in with taxes.
How does it spend more than it has? By going further into debt.
In 2018-2019 fiscal year, the federal debt was $22.7 trillion
Today? Today it is $26.7 trillion.
That’s how they got all that “free” stimulus money to send to people. They simply borrowed it from people and then sent it out to people.
Guess who is responsible for the repayment of that $26.7 trillion. Yep, American taxpayers!
Suppose I gave you a free $1,000 check for a year to help you get through a financial crisis. You are very grateful to me for giving you this free money. At the end of the year, you look at your credit card bill and there is a $12,000 charge on it. You ask me about that, and I explain that that’s how I was able to get the free money I gave you each month. Would you still be thanking me for giving you that free money.
Of course, the taxpayers can say, “Jacob, the Federal Reserve will just do what it has done since it was established in 1913. It will just print the money to pay off the debt.”
And they are right. The Fed has been printing money like it was going out of style. And they undoubtedly plan to liquidate much of the federal debt that way.
But as the old saying goes, there ain’t no such thing as a free lunch. Already the value of the dollar has been dropping in international currency markets, which makes is more expensive for Americans to purchase foreign goods and services. Here at home, food prices are soaring.
It’s just the beginning of the fiscal chaos that lies around the corner, which will be manifested in rising prices for most everything. Call it the inflation tax.
Moreover, the monetary crisis that is sure to come might well be aggravated significantly by China, the country that President Trump, the Pentagon, and the CIA have been pushing and provoking ever since Trump became president, especially with his trade war and his sanctions.
it just happens to be that China is the second-largest foreign holder of U.S. federal debt instruments. In fact, it was effectively China who financed George W. Bush’s war of aggression against Iraq, so as to enable him to avoid raising taxes on the American people to finance his war.
China certainly has no interest in getting paid back with cheapened, debased dollars. It could dump its debt securities to avoid that.
For years, statists have said, “Oh, China would never dump their U.S securities on the market all at once because it would lose too much money.”
But there are other factors that can play into such a decision, such as national pride and anger, which could well trump the monetary factors.
Today, the Global Times is speculating on that possibility. The Times writes: “China may gradually cut its holdings of U.S. Treasury bonds and notes, in light of rising tensions between Beijing and Washington, state-backed newspaper Global Times cited experts as saying.”
What would happen if China decided to do that all at once? It’s impossible to predict but one thing is for sure: It wouldn’t be pretty, given the sizable crash in the value of the U.S. dollar and the U.S. bond market that would likely occur.
And don’t forget: There are still the entitlements, especially Social Security and Medicare, that hang over the American people like a sword of Damocles. They aren’t part of the national debt.
And don’t forget: There are the Pentagon, the CIA, and the NSA, which are refusing to permit any reaction in the largess allotted to them.
And don’t forget: Tax revenues are dropping because of the coronavirus crisis.
In other words, Americans living today might well experience a perfect storm of crises involving economics, money, debt, taxation, and health. After some 90 years of the welfare-warfare state, the chickens might be coming home to roost. If that perfect storm hits, one can only wonder how much food there will be for them to eat.
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