Here we are on Friday night and let me say— go woke, go broke.
According to the Congressional Budget Office, through June, total federal debt in the hands of the public is $21.7 trillion dollars.
Total debt itself, which includes intergovernmental transfers (like social security, trust funds), comes to $28.5 trillion dollars.
So, call it 100% of GDP. It’s a nice round number and easy to remember. Under current law, the CBO estimates federal debt in public hands will be $35.8 trillion by 2031 in their 10-year forecast.
That is not including any of the new Biden spending proposals, which could be $3.5 trillion (or maybe $4 trillion or maybe $5 trillion) — or maybe more if they really crank up the woke.
The CBO also estimates that the government will spend more than $60 trillion dollars over the next 10 years. Again, that’s current law or what’s called “current services.” It does not include any new Biden proposals.
I’m impressed with the $60 trillion— call it 6 trillion a year— because it was only a few years ago we were spending about 3 trillion a year so that’s a double in just a couple years. Impressive, isn’t it?
Now, to my way of thinking, the most troublesome aspect of this is two-fold.
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First, government spending brings government regulation. These massive thousand-page bills (hardly anyone knows what’s inside them before or after they’re passed) have many strings attached to them.
Strings are regulations and this regulatory avalanche will choke off business activity of all kinds. In other words, it’s a supply side obstacle.
What happens is that even the same amount of money creation by the Fed will be chasing fewer goods because the production of goods and services will be blocked by the new massive spending regulatory state.
Second point— so much of the new spending we’ve already had in these COVID relief packages and virtually all of the new spending proposed by Team Biden and the progressive woke Left are cash payments, transfer payments and entitlement payments. None of these have work requirements or employment incentives.
Overly generous unemployment benefits, causing a massive wave of small business complaints because they can’t find enough people to fill job openings, is just the tip of the iceberg.
Plug in another $3 trillion or so of new cash benefits and assorted entitlements and you will have a larger number of able-bodied people who will stay home because it will not pay to work and that weakens the economy.
We need faster employment growth plus more rapid productivity growth in order to boost our potential to grow from less than 2% to back over 3%— where it was for 50 years up until the year 2000.
I haven’t even gotten to the negative effects of…
Read More: Larry Kudlow explains how government spending brings government regulation