The U.S. Needs To Fiscally Starve Itself
Congress passed and Biden signed the latest Continuing Resolution (CR) bill on Friday. CRs are an expensive way for the Federal Government to operate as CRs ensure that spending levels across the Federal Government will be flat-to-up as compared to the previous year’s fiscal spending level. This guarantees a fiscal deficit in 2024 that will exceed $1.5 Trillion and will likely be closer to $2.0-2.5 Trillion.
This unacceptable deficit assumes that China does not take Taiwan, that Egypt does not spill into a hot war with Iran and that the U.S. does not further escalate its stupid proxy war with Russia, which the U.S. can’t win under the current Administration (see 2021 Afghanistan withdrawal as proof of incompetence).
The year-to-date fiscal deficit is $532 billion (October 2023 through January 2024). This deficit is 16% higher year-over-year on a tax base that will be flattish at year-end.
Either the Federal Government will reduce spending in the coming years, or, the market will do it for Washington as fewer and fewer investors will wish to hold Dollars. Once the Dollar loses reserve status, the U.S. will be forced on a fiscal diet as it will no longer be able to print money at will.
Until such time, consumer prices will continue to move higher while Government spending will remain elevated.
My guess is that whomever wins the November General Election will oversee tax increases. The Trump tax cuts are set to expire on December 31st, 2025. I am 100% certain that Democrats want tax increases. Further, it is painfully obvious that Trump is not a fiscal conservative given his track record (lockdowns, stimulus checks).
The Federal Government should feel pain every time it spends a single Dollar, yet its modus operandi over the past 24 years has been to maximize spending - which of course hurts America. A financially weak America is weak from an Education standpoint, an Energy standpoint, a Technology standpoint, a Military standpoint, you name it.