It’s always useful to visit the museum in order to offset the recency bias that distorts perceptions of current realities.
In the great scheme of things, the picture below is admittedly not that ancient – from just 42 years ago. But it is nevertheless a museum piece because it pertains to a matter that has long since faded from the scene. Namely, the public debt and in this instance the day when your editor was compelled to warn the Gipper that the Federal debt was about to cross the dreaded one trillion dollar mark.
Back then, that prospect gave one and all the fiscal heebie-jeebies. Massive public debt was viewed as an immoral imposition on future generations and an economic scourge on the present. That’s because when properly financed in the bond pits it drove up interest rates, thereby crowding-out household and business borrowers and economic growth and rising prosperity on main street.
No more. Massive fiscal deficits year-after-year have become a way of life in the Imperial City, but even then CBO’s latest 10-year forecast is a shocker. It shows that even if there is no recession for the next ten years (fat chance!) and existing tax and spending policies (dashed red line) remain in place without enactment of a single new spending program or tax cut (even fatter chance!), the deficit will exceed $3 trillion per year by the end of the decade.
That would amount to a structural deficit equal to 8.4% of GDP and a ticket to fiscal perdition. In dollar terms, it would add $20.3 trillion to the public debt over the next decade, taking the total debt to $50 trillion by 2032.
That is to say, 50-years on from the photo above, the public debt will have risen fifty-fold.
Here’s the thing, however. Such horrendous projections do not phase these clowns one single bit – as was underscored in spades by Congress’ shameful boondoggling on the Ukraine aid bill. That $40 billion was rushed into law sight unseen and without the benefit of any committee hearings at all.
Worse still, the historic party of the antiwar left went abjectly AWOL. The vote among Dems was 48-0 in the Senate and 223-0 in the House. And those stunning counts include Bernie Sanders and the House "squad" all in the "yea" column.
That is to say, if Washington cannot muster even a single Dem "nay" vote on the funding of a mindless war that has no bearing whatsoever on America’s homeland security, then the prospects for restoration of even a semblance of fiscal discipline are somewhere between slim and none.
Indeed, what in the world is wrong with these blithering knuckleheads? Last week’s action brings already spent and promised Ukraine weapons and aid to $54 billion.
For crying out loud, Ukraine’s GDP last year was just $155 billion. At the current run rate, they have spent 120% of Ukraine’s GDP on its own destruction, and with no end in sight.
It is no wonder, therefore, that the pretentious little peacock who parades as the country’s president is now telling the world that the war will go on until the last Ukrainian soldier is dead and Washington’s endless bounty is finally used up.
After all, at a moment when Russia is making steady gains in Donbas, reportedly now poised to take all of Luhansk province, Zelensky instructed the grandees gathered at Davos that Ukrainian forces would fight to liberate all occupied territory:
Ukraine will fight until it reclaims all its territories," he stressed. "It’s about our independence and our sovereignty." This as there have been calls from a handful of European leaders to make some territorial concessions for the sake of ending the war based on a negotiated settlement.
Zelensky had said the day prior, on Tuesday, that negotiating recognition of Russia’s possession of Crimea is not on the table. "Russia will also have to leave Crimea," he had said during a daily briefing according to the Kyiv Independent. Speaking of Kherson, Melitopol, Enerhodar, Mariupol, he said the Russians must exit these and "all other cities and communities where they are still pretending to be the owners."
There is no other way to say it: Washington has empowered a madman, who is so smitten by his own strutting on the world stage that rationality itself has become the victim.
There is not a snowball’s chance in the hot place that Putin is about to give back Crimea, nor the Donbas and all the cities listed above by Zelensky. And when they stay in Russian possession it will not make a damn bit of difference to America’s national security anyway.
But, of course, that’s not what Ukraine is actually about. Those 271 Dem "yea" votes were merely an exercise in political virtue-signalling. They were a vote against Donald Trump’s avatar on the scene – the endlessly demonized Vladimir Putin.
That’s why the discourse about this calamity has lost all touch with reality. For instance, Zelensky is now saying that if Ukraine is not victorious, the Baltics will be next on Putin’s agenda and American servicemen will soon be shedding Article 5 blood in Latvia.
That’s absurd, yet nary of word of rebuke was to be heard from Washington. The town is in full on war heat with no compunction at all about the massive waste of American treasure or putting the American economy itself in harm’s way.
Thus, according to current reports the Biden Administration is looking for more ways to inflict damage on Russia’s economy by targeting buyers of Russian oil. As the New York Times reported last week, these proposed measures include so-called secondary sanctions that would block Russian oil buyers from doing business with companies based in the US and in other nations aligned with Washington.
Right. In order to win a pointless battle over some no count real estate along the Dnieper River, Washington is prepared to declare war on Chinese, Indian, Greek, Brazilian etc. companies.
Likewise, no matter that Russia wants to pay its international debts and US and European lenders are more than happy to receive the proceeds they are owed. But, no, these lenders are being expropriated by Washington’s writ – all to make sure that Putin gets the message.
So after Wednesday, US investors will no longer be allowed to receive bond payments from Russia without breaching sanctions. And this whole misbegotten Ukraine escapade is supposedly about defending economic freedom!
Finally, when it comes to becoming untethered from reality, last week’s pitiful double-talk about the "evacuation" of upwards of 3,000 Azov Battalion soldiers in Mariupol surely takes the cake.
The fact is, they surrendered hook, line and sinker in the first of what will soon be multiple occurrences along the Donbas front. But that did not stop Zelensky from powdering the pig:
"…our soldiers were transported to occupied territory for future exchange."
Right. We have now reached the point where Pravda of the Soviet era is looking like a plausible journalistic enterprise by comparison. As one commentator chided,
We can, of course, laugh, and often with a good reason. But that chorus of "not a surrender but carrying out orders", "not a surrender but an evacuation," "not an surrender but an exchange" is that Pravda newspaper from the anecdote.
A citizen can focus on a topic for several days. Kiev hopes that by the end of the week everyone will happily forget Azov surrendered, if they are not reminded of it. And who is to remind them of it when Ukraine’s media have been purged and placed under government control?
It’s the same in the economy.
Incidentally, one of Marchenko’s (finance minister) complaints concerned military salaries. He called them a heavy burden (they’ve been greatly increased, and the budget did not reflect it). But what then of Ukraine’s minister of defense’s plans to increase the size of the army to one million?
The "we have almost won, any minute now" approach might seem naïve. But Kiev has perfected it. It doesn’t matter whether it’s Azov or the economy. It all revolves around the effort to protect Zelensky’s ratings. The purpose of stubborn resistance is the same.
Historians will someday wonder how today’s insanities actually came to pass, but there is actually no mystery. Washington has become the world’s capital of perpetual war because it was able – for a time – to perpetually issue debt and then monetize it at the central bank.
At the end of the day, that’s the greatest central banking sin of all: It has turned the nation’s politicians – including so-called progressives – into Sunday afternoon warriors who are a menace to the nation, and, for that matter, to the entire planet.
David Stockman was a two-term Congressman from Michigan. He was also the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street. He’s the author of three books, The Triumph of Politics: Why the Reagan Revolution Failed, The Great Deformation: The Corruption of Capitalism in America and TRUMPED! A Nation on the Brink of Ruin… And How to Bring It Back. He also is founder of David Stockman’s Contra Corner and David Stockman’s Bubble Finance Trader.