“Fate is nothing but the deeds committed in a prior state of existence.” – Ralph Waldo Emerson
Capital Consuming Gluttony
In the fiscal year 2022, did you know that federal tax receipts as a percentage of gross domestic product (GDP) reached an impressive 19.6 percent? According to the U.S. Treasury, total federal tax receipts and additional government revenues soared to over $4.90 trillion. However, Congress spent $6.27 trillion during this same period, leading to a deficit of $1.37 trillion.
This troubling shortfall was covered through debt. Year after year, these deficits have accumulated, resulting in a staggering national debt of over $31.4 trillion today. For context, in December 2000, the national debt stood at just $5.6 trillion.
This means that over the last 22 years, the national debt has surged by 460 percent, while the U.S. GDP has only increased by 157 percent, rising from about $10 trillion to $25.7 trillion.
One might expect that with such substantial tax receipts, the government could balance its budget, or even generate a surplus to reduce the national debt. Historical precedents, such as President Andrew Jackson who eliminated the national debt in 1835 after just six years in office, seem to offer a hopeful narrative.
Unfortunately, this is not the reality of the 21st century U.S. government, where gluttonous spending appears insatiable. Nature will have to intervene as a solution.
Skyrocketing Fiscal Year 2023 Deficit
It’s not complicated to understand that spending beyond one’s means for decades is a poor approach to building wealth. Although many great nations have tried it, none have managed to sustain this practice indefinitely, and the U.S. stands to face the same fate.
We anticipate that 2023 will exacerbate the already alarming gap between the national debt and GDP, especially as the debt continues to grow at a much faster pace than GDP.
The initial months of FY 2023, which began in October, have shown lackluster results. Federal revenue increased by a mere 1 percent, suggesting a projection of only a 6 percent rise for the entire fiscal year, a sharp decline from the 21 percent increase witnessed in FY 2022.
The Wall Street Journal reported a 4 percent rise in individual taxes alongside a 6 percent drop in corporate tax revenue. Notably, other revenue sources, such as Federal Reserve payments, declined by 21 percent. With the Fed shrinking its bond portfolio, these payments could turn into deficits in 2023.
If the federal government fails to drastically cut spending to align with this slowing revenue, the FY 2023 deficit is poised to soar. Perhaps the debt markets will impose some necessary constraints.
Additionally, the federal government is confronted with rampant consumer price inflation due to years of unchecked money printing. Consequently, the Treasury can no longer rely on the Fed to create credit from thin air to purchase Treasury notes, as this would conflict with the Fed’s goal of controlling inflation.
For the first time since the inception of quantitative easing in late 2008, Washington will need to finance its extravagant spending through honest loans from discerning Treasury investors. Some investors may find today’s yields attractive, while others might not.
Mayors for Guaranteed Income
The crux of the matter is that the federal government will now depend on a careful class of lenders to fund its deficits, a situation we haven’t seen since the collapse of Lehman Brothers. While federal constraints may feel unfamiliar, state and local governments are likely to experience the real repercussions.
During the pandemic, numerous state and local governments took advantage of the federal government’s financial windfall, which was bolstered by extensive printing of money. Unfortunately, many politicians made short-sighted decisions to utilize this one-time funding to create new, ongoing spending programs.
Recently, we discovered that at least 82 municipalities across 29 states are promoting guaranteed income initiatives. Over 70 of these programs were established within the past year, fueled by a coalition named Mayors for Guaranteed Income.
How do these visionary mayors plan to fund their guaranteed income programs? They are looking to allocate federal pandemic relief funds from a $350 billion pool designated for state and local governments within the $1.9 trillion American Rescue Plan Act of March 2021. Remember, this money ultimately comes from you, the American taxpayer.
Cultivating a new class of dependents reliant on government support is not only reckless but also detrimental. Individuals who receive continuous assistance risk becoming apathetic and unable to provide for themselves, leading to lifelong dependency. What happens when this “guaranteed” income is no longer feasible?
These guaranteed income programs are setting the stage for potential disasters.
Your Government Hates You
Finally, we cannot overlook the enormous $1.7 trillion omnibus spending bill currently making its way through Congress. This extensive 4,155-page legislation resembles a Christmas tree bill, adorned with preferential gifts for various interest groups.
But what does it truly contain?
The headline amounts offer little clarity: $858 billion for defense and $772.5 billion for domestic initiatives raise more questions than answers. What are these “domestic priorities”?
To comprehend the troubling situation we find ourselves in, let’s turn to the Heritage Foundation for insight:
“[The Omnibus bill] contains billions in wasteful spending on ridiculous political pet projects, including the following:
- $1.2 million for “LGBTQIA+ Pride Centers” and another $1.2 million for “support services for DACA recipients” (a.k.a. assisting undocumented immigrants with taxpayer funds) at San Diego Community College.
- $477,000 for the Equity Institute in Rhode Island to indoctrinate teachers with “antiracism virtual labs.”
- $1 million for Zora’s House in Ohio, a “coworking and community space” for “women and gender-expansive people of color.”
- $3 million for the American LGBTQ+ Museum in New York City.
- $3.6 million for a Michelle Obama Trail in Georgia.
- $750,000 for “LGBT and Gender Non-Conforming housing” in Albany, N.Y.
- $2 million for the “Great Blacks in Wax” museum in Baltimore.
- $856,000 for an “LGBT Center” in New York.
- $750,000 for the “TransLatin@ Coalition” to provide “workforce development programs and supportive services for Transgender and Gender nonconforming and Intersex (TGI) immigrant women in Los Angeles.”
Your hard-earned tax dollars are being put to use in ways that many would find questionable. This serves as a glaring warning of the troubling direction our government is headed.
The truth is, if you work diligently, support yourself, value free speech and traditional ideals, and hold your beliefs close, the government—and its elite insiders—are not on your side. The explanation is painfully clear.
Merry Christmas!
[Editor’s note: If you haven’t yet invested in gold, now is the time. If you already own gold and seek further practical steps to safeguard your wealth and financial privacy, consider exploring those outlined in the Financial First Aid Kit. To learn more about this vital publication and how to obtain a copy, visit here today!]
Sincerely,
MN Gordon
for Economic Prism
