Opinion / Politics

Congress Creating “Stagflation”

congressAs COVID shows up in the rearview mirror, expect three big economic events. They are predictable. One is good, two bad. To avoid the bad, America must tell Democrats “stop!” If they do not stop spending, we will see Jimmy Carter’s “stagflation” before we know it. 

What is the good news? More people are going back to work; fewer are claiming unemployment. Supply chains are reopening, incomes rising, vaccines and herd immunity pushing elevated real growth. None of that requires more government. Truth is less government, better economy. 

Second, we Democrats are pushing new federal spending. To date, we have spent more on COVID in one year – $6 trillion – than on all wars since 9-11, twice 2008’s financial rescue, over 27 percent of US GDP.  See, e.g., https://www.foxbusiness.com/economy/us-spending-on-covid-relief-poised-to-hit-6t

Democrats no longer think in thousands, millions, or billions, just in trillions. Congress is pushing an “infrastructure bill” totaling $2.3 trillion, only one-fifth for surface transportation. The rest is largess, crony-capitalism for Democrat-affiliated causes, states, and contributors. 

Historically, infrastructure is the transport of water, power, communications, and humans – that is, transmission lines for power, communications, water, sewerage, and common conveyance, including roads, bridges, trains, ports, canals, and airports. 

The word “infrastructure” has never meant a take-over of private industry, $1.7 trillion dollars for halting fossil fuels, stopping “climate change,” retrofitting millions of homes, federal offices to “monitor domestic industrial capacity,” building half a million “new charging stations” to force electric cars, funding racial justice, gender equality, social programs, wealth redistribution, raising taxes, undermining capital investment, hitting consumers with pass-on expenses. 

Ironically, if Congress were honest, they could rebuild the entire interstate highway system for half a trillion dollars. The actual cost was $114 billion, near $500 billion in current dollars. See, e.g., https://www.whatitcosts.com/interstate-highway-system-construction-cost-history/

That is not the Democrats’ aim. Their aim is to centralize control, sideline states’ rights, create new federal dependence, new entitlements, and strong-arm the US economy …because they can. They possess the power to spend taxpayer dollars on their political agenda, with no one to stop them. 

They twist “infrastructure” to include unnecessary federal programs, adding taxes to force the poor Senate parliamentarian to call this bloated bill “reconciliation” – which it is not – letting them jam Republicans, with a 50-50 vote, plus Vice President Harris’ added one vote.

All this should rile average Americans. It amounts to an unjust, unethical power grab. In sum, they call things “infrastructure” that are not – to fool you. They call a bill “reconciliation” that is not – to fool you. They would call court-packing reconciliation if they could. 

Second bad thing: While Democrats spend others’ money freely, inflation threatens to disrupt, distort, and slow the US economy. Errors in judgment tied to program creation are, if not reversible, at least subject to modification, rescission, and reconsideration if Republicans regain Congress in 2022, White House in 2024. That would trigger lower taxes, fiscal restraint, less spending, and deregulation – restoring sustainable job-creation and growth. Think 2019. 

The immediate issue is the reverse: Mass spending of money we do not have. Our national debt is $27 trillion, a third held by foreigners. Even before $6 trillion in COVID spending $2.3 trillion on New Green Infrastructure, the national debt will exceed GDP by 2028. That ratio of national debt to growth simply not sustainable. Something must give. 

Hard reality: Our economy is booming on “cheap money,” plus hope for post-COVID activity. Republicans controlling House or Senate after 2022 might stop the bleeding – runaway spending – through divided government. But that does not solve inflation – which is set to rise sharply.

Raising taxes – as Democrats plan – to pay for unnecessary federal programs slows the economy. Our recovery is already fragile coming out of COVID, competing with China, facing new regulations. But higher taxes with mass federal spending is a formula for economic malaise. 

New spending cheapens the dollar. Dollars sucked from a productive private sector into a non-productive federal sector – bills printed with no new wealth – cheapen our currency. The effect is devaluation. That is where we are headed. 

Some will say dollar devaluation – even from mass overspending – means our products get cheaper abroad. True, but it also means inputs from abroad cost more, and so do goods at home. 

Instead of a virtuous cycle of private sector wealth creation, raising dollar value – which is what Reagan and Trump did – we get the reverse. 

We are set to see the dollar fall, prices up to pay for costly inputs, unions demanding higher wages to compensate for higher prices, those on fixed incomes with less spending power. The bad cycle includes other things. As inflation rises, driven by cheap money, too much federal spending, and an overheated economy, the Fed may raise interest rates hoping to cool borrowing. That increases interest paid on all debt – including our national debt. That deepens the hole.

In short, we see a hot economy – driven by recovery from COVID, low interest, loose money. But that cannot last, and it will not last with new federal spending. This fake “New Green Infrastructure” bill is gasoline on inflation, whacks the dollar, increases costs abroad (we buy 5 times more from China than they do us), pushes the Fed to raise rates (compounding debt), slows production, investment, and job growth – even at higher inflation. 

If we are not careful, we may make Jimmy Carter’s “Stagflation days” – stagnant growth and high inflation – look mild. The way to prevent this is to let Washington know: “Stop spending!” Notably, even former Democratic Treasury Secretary Lawrence Summers agrees: This is serious. See, e.g., https://www.bloomberg.com/news/articles/2021-03-20/summers-says-u-s-facing-worst-macroeconomic-policy-in-40-years#:~:text=Summers%20warned%20in%20the%20interview%20the%20U.S.%20was,brakes%20hard%20and%20push%20the%20economy%20toward%20recession.

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Bill
7 months ago

Though the American capitalistic economic system seems to be resilient, we are done. The elite would have you believe that economics is difficult but in reality it isn’t. If we were to ask the average person on the street what was the cause of inflation their normal reply would be to blame big business for high prices. High prices are only the “effect” of inflation. The “cause” of inflation is always “the government”!

Whenever the government increases the money supply by printing more money, it’s value drops and it takes more money to make a purchase. What makes precious metals like gold and silver so valuable is mainly their rarity. So it is with the dollar bill that whenever the government prints out more money it becomes more abundant and cheap.

Case in point the 20’s Stock Market Crash, where people had wheelbarrows full of dollar bills just to but an ordinary product. The big spending, deficit spending liberal politicians will eventually devastate an economy.

A return to the Bible in schools, what was termed ‘the Protestant work ethic’ and a government that realizes that they are ministers of God with delegated power and use His rule, will bring this nation back to a blessed state!

Stephane
7 months ago

The REAL DEBT???
Every child born in the US has a piece of paper with a “special” number on it. That number allows the “Corporation” to borrow the “future” income of that person. It was tested very deeply and used very simple formulas. All in all, the Corporation has borrowed many TRILLIONS of Dollars, against what the people would be producing in their lifetime.
The REAL DEBT is closer to 200Trillions than anything less. PLUS, evidently what the TRAITORS of the left have pushed for: obama, that pos 11 trillions, the left with their chinese virus pushed PRESIDENT TRUMP to add another 5 trillions, and now, 10 TRILLIONS in 3 months???
NOW IS THE TIME FOR ALL GOOD MEN AND WOMEN TO TAKE CHARGE OF THE COUNTRY, RECOUNT THE VOTES AND THROW AWAY THE THIEVES AND LIARS. VOTE NO MORE DEMONS IN THE GOVERNMENT.

Chuck
7 months ago

The “real” national debt is 123 trillion dollars. Costing every American citizen $800,000 to repay. This should be sobering. We are on the brink of economic collapse. It will make the 1930’s look like prosperity.

Mark L
7 months ago

How do we stop the DemocRATS? They favor everything mentioned in this article and I know more Americans than not want this rediculous spending to stop, others don’t understand the impact!
It’s a shame to say but most Americans that are middle income down don’t realize all these mandates will destroy our great Country!

Stephen Russell
7 months ago

Congress works for Congress NOT US

Mark L
7 months ago

Congress is the opposite of Progress

PaulE
7 months ago

You write “To avoid the bad, America must tell Democrats “stop!” Well when at least half the country is pretty much illiterate of both the history of what such current Democrat policies have produced in the past and the economic fallout that resulted from them, you’re expecting a response from at least half of America that can’t recognize the dangers posed. When this same group of people instead has its collective hands out and only knows or cares to ask their politicians for really one thing: “What else can you give me for “free?”, they’re not about to say “Stop!”.

Democrats more than willing to keep shoveling out massive amounts money we don’t really have or can afford, because they know their voter base all too well. As for the other half of the country, those of us who know how unsustainable and dangerous all this rampant, wasteful spending is, well frankly the Democrats don’t give a hoot about us. They control all the levers of power in Washington and they are NOT going to make the same mistake they did under Obama. They will ram through as much as they can, as fast as they can and make whatever changes they need to the system to ensure they remain in power indefinitely.

Remember, it’s not that the Democrats don’t realize what their policies will produce, but that they DO fully realize the economic and societal damage their policies will yield. They need to so damage the economy and society of this country as to bring about the conditions that will allow for the kind of wholesale “transformational changes” necessary for our journey towards becoming yet another failed socialist democracy. Stagflation is one of the hallmarks of a typical socialist democracy.

Mark L
7 months ago
Reply to  PaulE

Remember, based on Domino’s software, half the Country’s people might be for all this B.S.! I don’t think it’s true that why I wish the SCOTUS had null

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