The question I have is this: Who, precisely, are the adults?
If you missed it, Fed Chairman Jerome Powell recently told 60 Minutes that, “In the long run, the US is on an unsustainable fiscal path,” adding that it’s past time for an “adult conversation” about America’s extreme levels of debt.
Two thoughts I have here…
- If by “long run” JP means before the decade is out, he and I are on the same page. If he means something like 2040 or so, then he needs to recalibrate and shorten his expectations.
- Who, as I initially asked, are these supposed “adults?”
Let’s start with thought #2 first.
There are no adults in D.C. And the ones who pretend to be only do so to propel a re-election campaign.
I’m not going to run down the list of governmental ass-hats because that list would consume dozens of pages. I will only say that I am certain you are familiar with the clown car that is American politics at the federal level.
Buffoons, liars, criminals, cheats, morons, self-aggrandizing blowhards, warpers of reality, and financial illiterates…
That is the modern American political class.
It’s as if the creators of The Simpsons decided to collect a group of high-school losers who grew up to be life’s losers and then cast them into a real-life tragi-comedy called The Real Dumbasses of D.C.
The point being that Mr. Powell, hopeful as he is, is wrong to be hopeful about having an adult conversation with anyone on Capitol Hill. That will never happen.
The choices necessary to right America’s foundering ship are way, way—way!!—too painful for any politician to make.
Think about some of the options:
- Slash military spending.
Not gonna happen.
Nearly 700 former government officials, military officers, and members of Congress worked as lobbyists, board members, or executives of the 20 largest defense contractors in 2022. The Good ‘ol Boy Back-Scratchin’ Club in action.
- Impose Social Security taxes on America’s highest earners.
Not gonna happen.
Right now, every American who earns $1 million a year—or $10 million or $100 million or more—only pays Social Security taxes on the first $168,600 in income. After that… 0%.
But if Uncle Sam’s slow-witted minions started imposing the tax on income over $250,000 (it would affect just 6% of the population and not touch the middle class at all), Social Security is suddenly solvent until about 2050. But politicians don’t want to anger their biggest donors—the wealthy—so no-go on raising their taxes.
- Live within our tax receipts.
Not gonna happen.
As it is right now, America borrows more and more money every single year because the country doesn’t generate enough income to afford Congressional spending.
Back in the 1990s, during the Clinton administration, the two political parties worked together to build a smart budget that actually resulted in a surplus—the last surplus America has seen, and quite likely will ever see again. Uncle Sam had such minimal needs for borrowing at the time that the Treasury Department stopped issuing 30-year bonds.
Now, it’s deficit spending from here to eternity. And no politician wants to turn off the spigot because, again, the pain in the populace would mean that politician loses the only job he/she/it is qualified to hold.
Like I said, none of that is going to happen.
Instead, here’s what is going to happen…
America’s debts will continue to grow, guaranteed.
Interest payments will continue to consume a larger and larger portion of each year’s budget, meaning government will have to borrow more money just to pay for the spending necessary to run the country… which leads to more interest payments on those additional borrowings.
Note: Do not listen to the financially ignorant horseshit about interest payments only amounting to X% of GDP. That’s beyond retarded. Government does not spend GDP. It spends money allocated in the annual federal budget. As interest payments continually rise from here on out, they will consume an ever-larger amount of the budget. This year, for instance, they threaten to overtake defense spending. And fun fact: In every empire that has existed and crashed throughout history, the downfall accelerated when debt-repayment costs surpassed defense spending.
Basically, what I’m saying is that America will end up in a fiscal crisis that morphs into a currency crisis.
When?
Well last month, JPMorgan CEO Jamie Dimon told Congress that America faces a global “rebellion” from foreign owners of US debt who, at some point, are going to abandon the buck because they see that America is “going 60 miles an hour [toward] a cliff.”
Dimon says the cliff is about 10 years out. I say it’s about three to four years out. We’ll likely confront a crisis in the 2027/28 timeframe, led by the need to afford excessive interest payments on an extreme amount of debt.
People often ask me why politicians can’t just fix it.
The best answer I have is arrogance.
Politicians bathe in the belief known as American Exceptionalism. They think, “We’re America! Bad things don’t happen to us. We’re resilient and innovative, and the world beats a path to our door because we are the greatest country in the world!”
I appreciate the patriotism, but it’s misplaced when your debt of $34 trillion is larger than the economies of the next five countries combined: China, Germany, Japan, India, and the United Kingdom. That is a stunning indictment. Uncle Sam owes more in debt than five of the most important economies in the world generate in a year.
So, no—it’s not going to take 10 years before The Reckoning arrives.
And that’s precisely because there are no adults in the room.