Inflation Isn’t Over, And The Damage Will Continue

No one who has bought groceries recently or filled up their gas tank believes inflation is over. Yet recently economist Paul Krugman declared, “Inflation is over. We won.” I guess he doesn’t do the grocery shopping in his family. Yes, inflation has slowed. However, we are still dealing with the price increases that occurred in the past three years. If the baseline is where we were when President Biden took office, the inflation rate is somewhere over 15 percent. If we are talking about the past few months, the number is much lower. However, that number is in addition to the 15 percent that we have already been dealing with.

On Saturday, Real Clear Politics posted a commentary about the damage the Biden administration has done to the economy.

The commentary notes:

The truth is that the wild inflation, high interest rates, bank failures, and other economic harms of the last three years were all entirely avoidable and all entirely caused by President Biden and the Democrats’ arrogant and unwise policies.

This is not “Monday morning quarterbacking.” Some of us were saying this well before the fact. My May 7, 2021 column (“Joe Biden, Economy Killer”) accurately forecast the inflation, rising interest rates, and rising government debt service long before the Biden administration even acknowledged the risks were real.

The U.S. economy did not need another giant stimulus plan when Biden and the Democrats took control in 2021. The U.S. gross domestic product, knocked down by the COVID shutdown in the first half of 2020, had jumped up by a record 33% in the third quarter of 2020 and by another 4% in the fourth quarter, all before Biden took office. The S&P stock market had risen 16.3% in 2020. Employers were waiting for workers to come back to work, and another stimulus package had been passed with bipartisan support in the last quarter of 2020. Happily, the inflation rate was only 1.4% as 2020 ended, with a one-year Treasury rate of just 0.10% and a 10-year Treasury rate of just 0.95%

The commentary concludes:

The Congressional Budget Office last week revised its government deficit estimates upward, expecting $48.3 trillion of government debt by 2034. Interest expense on the federal debt this year has already jumped up to $870 billion, which is larger than the defense budget. Additionally, Biden’s higher interest rates will continue to increase debt service costs as old government debt rolls off and is replaced at higher costs. The risk is stark: a 3% higher interest rate on even the existing $33 trillion level of federal debt equates to $1 trillion of extra federal interest expense each and every year, on top of the already giant existing debt service number.

There is no painless way to pay down this deficit or cover this extra annual government interest cost. The need for billions and billions of extra tax money or budget cuts will fuel fierce political fights, populist divisions, and national anger for years to come. All this public unrest will also be the legacy of the bad Democratic economic policies since 2021. Professor Krugman, when it comes to Bidenomics, “We lost.”

I believe we can turn this around, but it will take an administration that includes people who have worked in the private sector and run businesses. Whatever administration is elected in November needs to include people hired for their qualifications and experience–not for any other reason.

Who Holds Our Debt?

CNS News is reporting today:

Chinese holdings of U.S. Treasury securities are 11.5 percent below their peak level which was attained in November 2013, according to data published by the U.S. Treasury.

U.S. government debt held by entities in the People’s Republic of China peaked at $1,316,700,000,000 in November 2013, according to the Treasury. As of August 2018, according to the latest date released by the Treasury this month, China held $1,165,100,000,000 in U.S. Treasury.

That is a drop of $151,600,000,000 from the November 2013 peak.

We are still carrying way too much national debt, and that will be a more serious problem as the federal reserve raises interest rates. However, although China is holding less of our debt, it is still the the top foreign holder of U.S. Treasury securities.

The article concludes:

While China remains the top foreign owner of U.S. government debt—despite its declining holdings—the Federal Reserve still owns far more. As of the end of November, according to the Federal Reserve, it owned $2,324,589,000,000 in U.S. Treasury securities.

China’s $1,165,100,000,000 in U.S. Treasury securities was only 50.1 percent of the Fed’s holdings.

It’s time to cut government spending and get out of debt!

 

 

Why We Need To Stop Runaway Spending

USA Today posted a story today that the U. S. National Debt is now equal to all goods and services produced by the entire U. S. economy in one year.

The article reports:

The amount of money the federal government owes to its creditors, combined with IOUs to government retirement and other programs, now tops $15.23 trillion.

The article includes a graph:

The graph shows how rapidly the national debt has risen in recent years.

The article concludes:

The White House and Congress agreed in August to cut about $1 trillion from federal agencies over 10 years. An additional $1.2 trillion in automatic spending cuts looms beginning next year if lawmakers can’t agree on a better way to do it.

Economist Mark Zandi of Moody’s Analytics says reaching the 100% mark shows “the grave need to address our long-term fiscal problems.”

We need to elect people in November who will stop the runaway spending.

  

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What Happens When Americans Are Not Paying Attention

This is a graph of U.S. gross federal governme...

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The Wall Street Journal reported on Thursday:

The U.S. Senate, in an unusual procedure, cleared the way Thursday for the U.S. to lift its borrowing authority by $500 billion to $15.19 trillion, enough to keep the support federal government borrowing through late January or early February.

The action came under an unusual legislative procedure spelled out under the August agreement to raise the U.S. debt ceiling and avoid a U.S. credit default. In a 52-45 vote, the Senate blocked an attempt by Republicans to slow down the process that will result in the $500 billion debt-ceiling increase.

Only one Democrat broke party ranks to vote with the Republicans in trying to slow down the measure–Senator Ben Nelson, a Nebraska Democrat. The article reminds us:

The next increase in the borrowing limit, likely in the first quarter of next year, will be dependent on the ability of a panel of 12 lawmakers to reach a deal that cuts at least $1.2 trillion from federal budget deficits over the next decade.

The procedure used to vote on the increase was part of the debt ceiling worked out with President Obama in August. The bottom line here is that the spending continues unchecked as Congress goes on its merry way. It’s time to replace those in Congress who are continuing the spending with people who understand the fact that they are spending the taxpayers’ money–not their own.

 

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