Fiscal sanity loses its luster — Let’s borrow our way to prosperity!

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News Analysis

Do you, or anyone you know, really think that this country can afford $2 trillion to refurbish our nation’s infrastructure? That’s the proposed price tag for a plan tentatively agreed upon by President Trump and some high-ranking Democrats.

This country works best when we at least pay lip service to the prospect of balancing the federal budget – even though it has only been done in recent years during the second term of Bill Clinton.

To come up with $2 trillion will require some heavy-duty borrowing, on top of the $23 trillion that we already owe. It’s OK to borrow, and but let’s not kid ourselves. ‘Borrowing’ also includes printing money from thin air – which is not OK.


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Please take a look at the chart on this page. You’ll see four different categories of lenders to the U.S. Government – local or state governments, domestic entities, international entities, and the Federal Reserve Bank.

The first three categories understand that the United States remains the strongest, most vibrant economy in the world. So they say ‘what the heck’ I know the USA owes a lot of money, but I’m going to earn some interest and I can get all of my money back at some point.

Fair enough.

What concerns me is ‘borrowing’ from the Federal Reserve. It is a swath on the chart that is growing.

THIS IS NOT BORROWING! THIS IS PRINTING MONEY!

The Federal Reserve’s portion of our national debt represents money that has been printed from thin air. And, if we are forced to borrow another $2 trillion to finance infrastructure, then a lot more of this supposed borrowing will actually come from Uncle Sam’s printing presses.

And, one day, when we have printed way too much of this ‘funny money,’ look for rampant inflation to occur.

Avoiding inflation is very, very important. However, there is another reason that we should strive to balance our nation’s budget. You may be vaguely familiar with a quote from Alexander Fraser Tytler. My guess is that in the early days of our country he would have been the equivalent of a prognosticator – similar to the pundits that show up on Sunday morning TV news shows of the 21st Century.

Here is what he predicted:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.”

Economic thinking is undergoing a dramatic shift in this country. There is an insidious policy looming called Modern Monetary Theory. No longer are we striving for fiscal sanity. It looks like we have given up. Let’s print money for all of our borrowing needs.

May God bless the USA.