The irony here is that both political parties have completely different “values” regarding spending and money allocation, but its almost unfailing that whoever is in office, they just keep on sending those spending bills for approval and they get signed. Yet, us lowly middle-class Americans are just expected to toe the line and take the ‘crumbs’ and keep our mouths shut.
So how does this apply to today? Well, any person reading this has had gas, groceries, housing, rent, taxes, auto, medical expenses or pretty much any other commodity increase in the last year, the first year of the Biden admin. According to Gwynn Guilford over at the Wall Street Journal, inflation has hit a high of 7%, the highest such increase since 1982. That came after the horrendous spending 4 years of Jimmy Carter.
Put that in perspective, Biden inherited an economy that was the strongest it’s been in 40 years, jobless rates on the decline, a solid recovery from the pandemic in toe, and a consistent economic platform that all he had to do was just leave alone and he could have napped his way into decent approval ratings. But why, why did he have to change the economic machine that his predecessor had created?
Question 1- Where will the money come from?
Well in our homes we have our savings, our checking’s and possibly some investments, 401k or IRA. So, when we need money we first look to those elements. The problem is, if for arguments sake you make $100k a year. An instance of needing 50k immediately, (50% of your income) without a loan is going to be tough to swallow. Well, what if you don’t have it in savings. Then you realize you have no retirement plan money. Then you realize you can’t borrow because your credit score is bad and you already owe 5 times your annual income to other creditors.
Then your next line of attack would be to just print more money. The problem? It’s illegal for us citizens to do it. BUT… If you are the U.S. Government, you just print the money and say no one has to pay for it. It was just Manna from heaven.
FDR, Bush, Obama and Trump all had these moments in their presidencies. As a partisan but at least a fair one, I would say Bush and Trump in their instances were under immense political pressure. One with the housing crisis of 2008 (which Bush is on record warning would happen if it wasn’t addressed) and Trump with the pandemic, it was a no-win situation all around. But as a principled person all of those situations should have never happened. In the end the math is never wrong, and the principle still remains. All debts are paid, either by the debtor or the creditor. All debts!
So, you might be asking how does this apply to the inflation we are seeing today, and the government money problem I am discussing? Its easy. The situation with your home I just explained above, IS the U.S. government. The last “stimulus” was just at $2trillion. That is just over 50% of the annual revenue by the government from taxes. There is no savings, no retirement fund and we owe over $22trillion in debt (over 5 times what we take in annually) to other creditors.
That too is easy. Economics 101. I like the way a podcaster I listen to puts it, simple, easy analogies. That $2 trillion was infused into the economy over a several month span. In that span, the U.S. with the lock downs and work shortages caused by them, we didn’t produce anything to earn that $2trillion now flowing through the economy.
In other words, if you have 100 chairs, and the consumers have $100 then its logical to say each chair can go for $1. If you now have those same 100 chairs (nothing new produced) but now consumers have $300 then now each chair can fetch $3. A 200% increase in price. The government spending causes the same thing. In the stimulus situation from COVID it was even worse because we didn’t have 100 chairs when we got the money, we had 50 because half the workforce was locked down.
In the next article I will discuss how lowering taxes and increasing growth can help us overcome some of this, but what needs to happen, is everyday Americans starting to ask their legislators: Where will the money come from? Because that my friends, does in fact matter.