By Bill Bonner
DELRAY BEACH, FLORIDA – We’re down in Florida to meet a new grandchild.
It’s a different world down here – different from Ireland, Maryland, France, Argentina… our usual haunts.
Florida is flat. And barely above sea level. If the North Pole keeps warming, much of South Florida will be underwater soon.
The people here are different, too. They are either young, tanned, and taut… muscled and contoured. Or they are old, broken-down retirees. There don’t seem to be many in the middle… ordinary people, that is.
And they all seem to have a shorter outlook, as if they were aware that they will soon be swept away by the waves. People here are more eager to go out… to show off… and to spend money.
Cars, for example, are newer and cleaner than those you see on the streets of Baltimore. And they are bigger and flashier than those you see on the country roads of Ireland. Houses, too, at least along the coast here, are bigger and fancier.
There are also many more shops and restaurants here. Drive down almost any road and you’ll find strip malls, outlets, chain stores, and franchises everywhere… with dozens… hundreds… thousands of places to spend money.
With so much retail capacity to support, it is amazing that people have any money left.
And what will happen when the hurricane comes and the money disappears?
In the meantime, the taunting, tussling, and hair-pulling continues. Trump promised to punish General Motors (GM) for cutting losing operations. POTUS says he’ll even demand that old bailout money be repaid if GM goes through with its plan to cut 14,000 U.S. jobs.
And he told the Chinese how to run their business, too – insisting that they cut their tariffs on foreign-made autos.
Then, he claimed that “Mexico would pay for the wall,” just as he had promised during the election. Only, Mexico has no intention of paying for the wall. So he fudged, saying that it could be paid for from “savings” that come from something-or-other.
Off the political stage, the real battle has begun – the one that will affect all our lives for many years to come. From Bloomberg:
The U.S. posted the widest November budget deficit on record as spending doubled revenue.
Outlays jumped 18 percent to $411 billion last month, while receipts were little changed at $206 billion, the Treasury Department said in a monthly report on Thursday. That left a $205 billion shortfall, compared with a $139 billion gap a year earlier.
Dear readers will recall that deficits aren’t supposed to be increasing. The Christmas tax cut last year was advertised to stimulate growth; extra tax revenues would reduce deficits, we were told.
So far, the debt has gone up… and will more than likely double by 2018. Here’s Bloomberg again:
The Tax Cuts and Jobs Act that President Trump signed a year ago seems to have boosted economic growth in 2018. But there’s little evidence yet that it’s setting up the U.S. economy for faster growth over the longer term, which is what the White House and the legislation’s backers in Congress promised.
BOTTOM LINE – Trump and his backers in Congress promised tax cuts would boost the long-term growth potential of the U.S. economy. The data so far don’t support that claim.
Deficits Run Wild
U.S. debt is rising… about twice as fast as GDP.
And it will get worse. With a Democrat majority in the House, there is no way a broad program of spending cuts or tax increases could be passed. That leaves entitlements and military spending both running wild.
The Committee for a Responsible Budget estimates that we will see $2 trillion deficits by 2027.
But as we pointed out yesterday, this does not account for an economic recession. Come the next crisis… the problem will intensify. Tax revenues will plummet and calls to spend more money will grow louder. Deficits will grow to $2 trillion a year in 2019 or 2020.
What will happen then? Former Fed chief (the last honest one), Paul Volcker, 91, foretells the future:
Someday confidence is lost… Eventually, it breaks down…
…And then, the hurricane hits… and the country goes broke.
But at least the president isn’t worried about it. From The Fiscal Times:
As a candidate, Donald Trump said he could eliminate the national debt in eight years, largely by focusing on better trade deals. But in office, Trump has presided over a considerable increase in red ink, with annual deficits expected to surpass $1 trillion as soon as 2019. Overall debt is rising accordingly, with the national debt held by the public surpassing $16 trillion for the first time last week. Total debt outstanding is now approaching $22 trillion.
Trump isn’t too worried about it, though, The Daily Beast reports.
One early 2017 presentation by senior officials about the projected explosion in the debt was reportedly met with a blunt response by Trump: “Yeah, but I won’t be here.”
Maybe he won’t be here. And maybe we won’t either. Too bad for our new grandchild though.