The U.S. economy had a blockbuster second quarter, with growth surging to a 4.1 percent pace, the Commerce Department said Friday. That was nearly double the first quarter rate of 2.2 percent and the strongest pace in nearly four years.
President Trump has been steadfastly claiming that his policies will catapult the U.S. economy into a much higher rate of growth — 4 percent over the next few years.
That would be about double the growth rate in recent years. And it would almost certainly mean a big boost in the standard of living for many Americans, with higher wages and better public services as the government raked in more tax dollars from a booming economy.
“We’ve accomplished an economic turnaround of historic proportions,” Trump said in remarks at the White House Friday morning. “Once again, we are the economic envy of the entire world.”
Even with the economic surge, are there still fundamental warning signs?
Socialist Democrats continue to screech for universal healthcare, free college tuition, guaranteed wages, and more free, free, free, the federal government is already spending approximately 52,000 dollars per second. The national debt has reached a record 21 trillion dollars, which is more than America’s gross domestic product (GDP).
This year, both Social Security and Medicare will have to draw down on their reserve funds to be able to pay benefits. The Social Security and Medicare trust funds will both soon be bankrupt. This will all have to be accounted for in the federal budget and by American taxpayers.
The Untied States is currently spending more on its military than the combined budgets of the next seven highest spending countries, and Congress recently increased military spending by 82 billion dollars–a total of 716 billion dollars. The US House has also recently passed a farm bill that increases spending by more than 3 billion dollars over the next five years. This bill does not take a step toward ending subsidies to wealthy farmers and even continues providing farm subsidies to non-farmers. The House version of bill increases the budget for food stamps by at least 1.7 billion dollars over the next five years.
Logically, congress will need to cut spending and raise taxes. They will never do that, and will instead, it will rely on the Federal Reserve to fix things using the inflation tax.
Trump’s tax reform plan increases the inflation tax by authorizing the use of “chained CPI.” Chained CPI hides inflation’s effects by claiming that rising prices do not harm Americans as long as they can still afford low-cost substitute goods to replace products they can no longer afford due to the Federal Reserve’s devaluation of the currency.
Increasing federal debt will also force the Federal Reserve to keep interest rates low to prevent federal interest payments on the debt from exploding. The Fed’s monetization of the debt will lead to hyperinflation and a rejection of the dollar’s world reserve currency status.
The danger, the good and bad is that the welfare and the fiat currency system will have to end. What that means for the average Joe is that they may need to develop a taste for cat food.
Buy precious metals.
Not for investment, for protection.
And not “paper” metals life ETF’s, Actual metal.
‘cuz you never know. it could all come tumbling down.
Worse comes to worse you can melt the silver into bullets for the werewolves.
Or play the Lone Ranger. Hi-ho Silver, away!
…..and exactly how is building “the wall”, increased subsidies to farmers as a result of tariffs and a “military parade” going to help this picture???
This is a subject that requires some historical perspective.
For those of us who bother to recall such things, back in September of 2008, Socialist Bernie Sanders appeared on CNBC’s Kudlow and Company, where Sen. Bernie Sanders (I-VT) is said to have dismantled host Larry Kudlow’s proclaimed support for unfettered free market enterprise.
Sanders told Kudlow that after all the “ranting and raving” he had done “against government intervention and [extolling] the virtues of the free market,” he must surely be against the bailout.
“No, I’m in favor of the bailout,” Kudlow said.
“You’ve become a socialist overight!” Sanders responded, telling Kudlow, “Your version of socialism is to bail out the rich.”
Kudlow said that he’s in favor of government intervention “every 20 or 30 or 50 years.”
Sanders responded:
“Larry, if I ask you that the government should intervene like every other industrialized country does and provide health care for all people, you’d say ‘oh no!’”
“And if I ask you to support government intervention so that we don’t have the highest rate of childhood poverty in the world, you’d say ‘oh no!’”
“But when Wall Street screws up because of their greed, you say, ‘oh yes, it’s a great idea!’”
Proving the Senator’s point, Kudlow ended the segment by stating: “You’re quite right, Mr. Sanders.”
end quotes
Today, Larry “Kuddles” Kudlow, who in his earlier years was a member of the left-wing Students for a Democratic Society, is serving as Gary Cohn’s replacement at the National Economic Council for Trump.
Getting back to the deficits “Kuddles” was in favor of back in 2008, the FIRST TRUST Monday Morning Outlook by Brian S. Wesbury – Chief Economist Robert Stein CFA – Senior Economist, Dec. 8 2008 gave us as follows:
Obama: Try Spending Surge, Because “Deficits Don’t Matter”
With economists of all stripes worried about a “liquidity trap,” the typical map of political ideology has been swept under the intellectual rug.
John Maynard Keynes posited that in a liquidity trap, consumers and businesses are so fearful to spend or invest, that they hoard cash.
Keynes said that when an economy falls into such a trap the government must spend because individuals and businesses won’t.
In the past two months, the Federal budget deficit totaled $408 billion on a cash basis.
For the full fiscal year it may grow to as much as $1 trillion.
Add to this the likelihood of an auto-company bail out, and a new very large (possibly $600 billion) stimulus package proposed by the Obama team.
President-elect Obama says that all of this spending is necessary to boost an economy that is likely to get worse before it gets better.
He also told Meet The Press that deficits don’t matter, saying “we can’t worry, short-term, about the deficit.”
end quotes
Then, from there, fast forward to March 12, 2018 and a Marketwatch article by Greg Robb, to wit:
The U.S. government recorded a monthly budget deficit of $215 billion in February, up 12% from the same month last year due to lower revenue and higher spending.
For the first five months of the fiscal year, the government’s deficit is $391 billion, $40 billion more than the shortfall during the same period last year.
Revenues were down 9% in February from same month last year.
Withholding taxes were 2% lower, the Treasury Department report said.
Spending was $7 billion more than in the same period a year ago.
Outlays for net interest on the public debt increased by 9% to $28 billion.
The decrease in withholding during the month is the earliest sign of the effect of the Trump tax cut, analysts said.
March could show an even steeper drop.
The Trump White House has forecast a $833 billion budget deficit for this year that ends Sept. 30, up from $666 billion in the prior year.
Analysts think the deficit could be higher.
“Between last [month’s] budget deal and December’s tax bill, the country is on a borrowing spree that will lead to the return of trillion-dollar deficits by next year and $2 trillion within a decade or so.”
“We’ve taken fiscal recklessness to a new level and it’s time we begin our recovery,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
end quotes
And from there we come to April 9, 2018 and a Marketwatch article by Robert Schroeder, as follows:
The Congressional Budget Office on Monday forecast a rising tide of red ink in the coming years, saying that trillion-dollar deficits will return in 2020 in its first report since President Donald Trump signed last year’s tax cut and this year’s big spending bill.
The CBO said the budget deficit would be $804 billion for the current fiscal year, which ends Sept. 30, well above the $665 billion shortfall the government notched at the end of fiscal 2017.
The coming shortfalls will follow the $1.5 trillion tax cut Trump signed in late December, as well as the $1.3 trillion spending bill he enacted in March.
The CBO’s report came with a warning about the rising debt that would result from accumulating deficits.
Debt held by the public will rise from 78% of the economy at the end of 2018 to 96% by 2028, the report estimated, and said that would increase the likelihood of a fiscal crisis.
end quotes
Then we move forward again to a Wall Street Journal by Sarah Chaney published June 12, 2018, as follows:
WASHINGTON—The U.S. government’s budget deficit widened in the first eight months of its fiscal year as spending rose faster than revenues compared with the same period a year earlier.
The deficit, or the difference between the amount of money the federal government spent and what it took in, totaled $532.24 billion in October through May, the Treasury Department said Tuesday.
That was 23% more than the deficit of $432.85 billion during the same period a year earlier.
Tuesday’s report showed the federal budget deficit was $146.80 billion in May, 66% wider than the same month a year earlier.
Government revenue fell 10% last month compared with a year earlier, while spending grew 11%.
end quotes
And then we come to the New York Times article “How the Trump Tax Cut Is Helping to Push the Federal Deficit to $1 Trillion” by Jim Tankersley on July 25, 2018, as follows:
The amount of corporate taxes collected by the federal government has plunged to historically low levels in the first six months of the year, pushing up the federal budget deficit much faster than economists had predicted.
The reason is President Trump’s tax cuts.
As companies operate with lower taxes and a greater ability to reduce what they owe, the federal government is receiving far less than it would have before the overhaul.
The Trump administration had said that the tax cuts would pay for themselves by generating increased revenue from faster economic growth, but the White House has acknowledged in recent weeks that the deficit is growing faster than it had expected.
The Office of Management and Budget said this month that it had revised its forecasts from earlier this year to account for nearly $1 trillion of additional debt over the next decade — on average, almost $100 billion more a year in deficits.
In the trough of the Great Recession in 2009, when companies were laying off hundreds of thousands of workers each month, corporate tax collections plunged by almost a third.
It was the largest quarterly drop since the Commerce Department began compiling the data in the 1940s.
No other period came close — until this year.
From January to June this year, according to data from the Treasury Department, corporate tax payments fell by a third from the same period a year ago.
The drop nearly reached a 75-year low as a share of the economy, according to federal data.
end quotes
And then, we go back to November 9, 1999 and a CNN article entitled “Trump proposes massive one-time tax on the rich” by Phil Hirschkorn/CNN, as follows:
NEW YORK (CNN) — Billionaire businessman Donald Trump has a plan to pay off the national debt, grant a middle class a tax cut, and keep Social Security afloat: tax rich people like himself.
Trump, a prospective candidate for the Reform Party presidential nomination, is proposing a one-time “net worth tax” on individuals and trusts worth $10 million or more.
By Trump’s calculations, his proposed 14.25 percent levy on such net worth would raise $5.7 trillion and wipe out the debt in one full swoop.
The U.S. national debt decreased by $9.7 billion in September but remains at $5.66 trillion, according to the latest U.S. Treasury figures.
The net worth tax is the cornerstone of Trump’s economic plan released Tuesday morning.
“No one has put forward a plan to make this country entirely debt free as we enter the next millenium,” Trump said in a written statement.
“The plan I am proposing today does not involve smoke and mirrors, phony numbers, financial gimmicks, or the usual economic chicanery you usually find in Disneyland-on-the-Potomac,” Trump said.
Trump would exempt the value of an individual’s principal home from the net worth total.
“By my calculations, 1 percent of Americans, who control 90 percent of the wealth in this country, would be affected by my plan,” Trump said.
“The other 99 percent of the people would get deep reductions in their federal income taxes,” he said.
Eliminating the national debt would save the federal government $200 billion a year in interest payments, Trump said.
He proposes to earmark half the savings for middle class tax cuts, and the other half for Social Security.
Trump said depositing $100 billion annually in the Social Security trust fund would generate $3 trillion “over the next 30-years, when the trust fund is scheduled to go broke” and instead keep the fund “solvent through the next century.”
The tax also would lead to the repeal the current federal inheritance tax “which really hurts farmers and small businessman and women more than anything else,” Trump said.
Trump, whose own net worth is an estimated $5 billion, says the wealthy would not suffer if his economic plan were enacted.
“Personally this plan would cost me hundreds of millions of dollars, but in all honesty, it’s worth it,” Trump said.
Trump predicts his debt elimination combined with his tax cuts would trigger a 35 to 40 percent boost in economic activity, with more business start-ups, more jobs, and more prosperity.
“It is a win-win for the American people, an idea no conventional politician would have the guts to put forward,” Trump said.
end quotes
So who is the real Donald Trump here?
And where is he taking us?
What happened to his plan to end the deficit?
Any ideas, anyone?
And while we all contemplate just how good the U.S. economy is doing under Trump today, we have this Marketwatch article “U.S. expects to borrow $329 billion in third quarter, largest borrowing in that period in eight years” by Greg Robb published July 30, 2018 to consider:
The U.S. Treasury expects to borrow $329 billion in the July-September quarter, $56 billion more than previously estimated, according to a statement Monday.
This is the largest borrowing in the third quarter since 2010 and is well above the $189 billion borrowed one year ago.
Analysts at Jefferies estimated the government will end up borrowing over one trillion dollars this fiscal year, which ends Oct. 1.
According to the Washington Post article “Layoffs from Trump tariffs are piling up. So are calls for more bailouts” by Heather Long on 31 July 2018, the cost of Trump’s tariffs are beginning to make themselves felt in America, with a cost to be born by the American people, and the U.S. economy, to wit:
Jane Hardy, the chief executive of a company that makes lawn-care equipment, says she had to lay off 75 employees this summer because of President Trump’s trade war.
As she fights to keep her southern Indiana business going, Hardy is one of several manufacturers warning the White House that, unless they see relief from the tariffs soon, job losses will mount and factory closures are likely.
Trump has repeatedly said he would protect American farmers in the trade war, last week setting aside $12 billion to help them, but he is facing pressure to extend aid to other industries if the tariffs remain in place or get extended to more products.
Extending those bailouts would be an expensive proposition.
The U.S. Chamber of Commerce on Monday estimated the total price tag could hit $39 billion if Trump compensated the losses across all industries.
It would take $7.6 billion to help car and automobile parts manufacturers alone, the Chamber said, calling it a “slippery slope” for Trump to determine who gets help and who doesn’t.
Hardy’s company, Brinly-Hardy, has been in business since 1839.
It survived recessions and the Civil War, but it might not survive a prolonged trade war.
Hardy buys steel from U.S. companies, but Trump’s tariffs on foreign steel have caused domestic prices to rise, as well.
Steel costs have jumped 33 percent since the start of the year, and Hardy says her costs are up even more.
The federal government ran a monthly budget deficit of $77 billion in July, up 79% over the same month a year ago.
For the first 10 months of fiscal 2018, the shortfall totals $684 billion, according to the Treasury Department.
That’s an increase of 21% compared to the same period in 2017.
Receipts fell 3% compared to last July, with the government getting less money from both corporations and individuals in the wake of the new tax law.
Corporate revenues were down 34% as companies enjoyed a reduced 21% tax rate.
And individuals continued to send fewer tax dollars to the Treasury, after lower withholding from paychecks took effect in February.
Spending, meanwhile, jumped by 10% in July as the government shelled out more for programs across the board.
Interest payments on the public debt jumped by 41% in the month.
Congressional budget analysts predict the deficit for the full year will be about 19% bigger than last year’s shortfall, the result of both the Republican tax law and spending boosts approved by lawmakers earlier this year.
The Congressional Budget Office predicts trillion-dollar deficits will return in 2020.
– MARKETWATCH By Robert Schroeder Published: Aug. 10, 2018 2:01 p.m.
The Democrats and Republicans in Washington, D.C. are just like rats in a farmer’s corn crib eating all the corn, and instead of getting rid of the rats, the American people instead buy more corn at an exponential rate which is exactly what the 41% jump in interest payments on the public debt is equivalent to.
Not only does that money get put to no productive use on behalf of we, the American people; it goes to our debt holders like China to help tide them over from any impacts of Trump’s tariffs, which are a tax on the same American people who are shipping American money off to China in the form of interest payments, so the more the Democrats and the Republicans in Washington borrow, the more the Chinese just love it, and why not – for them, it is free money.
I wonder what Forrest Gump would have to say about it.