The Phaserl


Here Come the Big Spenders — Fiscal Bloodbath Dead Ahead

by David Stockman, DailyReckoning:

Donald Trump is an utterly accidental President who has fine aspirations to make America great again, but no semblance of a program that can accomplish that goal. And no prospect that the ruling elites will permit him to govern.

In fact, they will thwart him at every turn — as should have been more than evident by the hysterical campaign about Russian hacking that was waged against Donald Trump during the final weeks of the campaign, and then with almost frenzied malice after his shocking victory on November 8.

There can be no doubt whatsoever that the Deep State was attempting to delegitimize his Presidency from Day One, and that it will intensify the mobilization of its vast resources, and the tools and shills it controls in the mainstream media, now that he has taken office.

So do not expect the kind of honeymoon period of goodwill and deference that has been granted to every President in modern times. Instead, within weeks the Trump White House will be engulfed bitter partisan conflict and crisis.

On the Neil Cavuto Show Wednesday I summed up my outlook for the incoming Trump Administration: Lots of hope, zero faith.

That is, the stinging defeat Donald Trump administered to the ruling elites on November 8th was surely the single most hopeful political event of this still young century, and may well even eclipse Ronald Reagan’s shocking victory in 1980. I sure hope Trump drains the Swamp. I wish him all the best. But I’ve seen this movie before — and even had a bit part in it.

And the plain truth is that if Ronald Reagan couldn’t drain the Swamp way back then, how in the world after 36-years of relentless self-aggrandizement by the Imperial City can Donald Trump do it now?

In fact, in inflation-adjusted dollars, the military-industrial-intelligence-homeland security-veterans complex is 2X bigger than it was in 1980 and total entitlement spending is 4X greater (from $700 billion to $2.6 trillion in constant dollars).

In fact, in inflation-adjusted dollars, the military-industrial-intelligence-homeland security-veterans complex is 2X bigger than it was in 1980 and total entitlement spending is 4X greater (from $700 billion to $2.6 trillion in constant dollars).

The problem, of course, is that Donald Trump wants to spend more on the former and give a free pass to the latter.

Likewise, he has said hardly an intelligent word — or any other kind — about how he intends to defuse the ticking time bomb of $20 trillion in public debt he will inherit, which is objectively $30 trillion based on built-in policy through the next decade.

And that’s before Trump borrows a single dime to fund his Mexican Wall, defense build-up, tax cuts, infrastructure boondoggles, veterans benefits and border enforcement initiatives.

Ronald Reagan was at least willing to tilt at windmills in the entitlements arena and hated fiscal profligacy and public debt. To be sure, he ended up an accidental Keynesian who presided over a massive spree of red ink stimulus the likes of which had never been seen in prior peacetime history, but that was a consequence of beltway politics, not philosophical belief.

As I have chronicled in the Triumph of Politics, the Kemp-Roth supply-side tax rate cut was targeted at 3.5% of GDP but ended up at more than 6% of GDP due to a bidding frenzy on Capitol Hill among business groups and special interest lobbies ranging from real estate developers (like Donald Trump was then) to oil royalty owners and wood-burning stove manufacturers.

Likewise, he pledged 5% real growth in defense spending during the campaign and ended-up with a 10% real growth rate once the military-industrial-Congressional complex got through with his build-up by adding one of everything to the Pentagon’s swelling budget — needed or not — in Noah’s Ark fashion.

Reagan even got a mini-infrastructure program in the area of fixing local potholes and funding bus and mass transit lines when he had promised to turn those functions back to state and local government in proper Federalist fashion.

At the same time, what began as an all-out rhetorical assault on the domestic welfare state on the campaign trail ended-up as a few incidental nicks in the night when it was all over. Not a single significant Federal agency was eliminated. By his second term total spending for domestic function amounted to 15.5% of GDP — only a hair under the 15.9% average under the purportedly big spending Jimmy Carter.

Needless to say, it didn’t add up — not by a country mile. In fact, the $930 billion of public debt Ronald Reagan inherited had erupted to $2.7 trillion by the time he left office. Stated differently, the $1.8 trillion Reagan added to the debt was nearly double that incurred by all of his 39 predecessors during the first 190 years of the Republic.

Republican cheerleaders have pronounced the 1980s to have been a supply side miracle of growth and resurgent capitalist vigor. But it was actually nothing remarkable except for a three-year boom of 4-6% real GDP growth in the mid-1980s fueled by the greatest Keynesian deficit stimulus ever imagined before that time. At the peak, red ink exceeded 6% of GDP compared, for instance, to LBJ’s infamous “guns and butter” deficits which barely amounted to 2% of GDP.

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