As political fear-mongering speeches go, President Biden’s Nov 2 address to the nation was a record breaker. His prime-time address warned the nation of a grave “threat” to “democracy,” from “dark forces,” that has put everything from our “personal freedoms” to the “rule of law” “on the ballot”. Normally, this kind of talk was reserved for events like World Wars and economic calamities, and the public listened. Instead, Biden’s speech was seen for the transparent political chum it was. Voters have seen this apocalyptic movie in the midst of a political cycle before and know its self-serving motivations. And the Democrats rolled out the big guns to parrot their message with Barack Obama telling an Arizona rally this week that democracy “may not survive” the midterm election: Then there was Hillary Clinton during a Manhattan rally for Gov. Kathy Hochul on November 3, accusing Republicans of using fear tactics around crime to attract voters. “They don’t care about keeping you safe,” Clinton said of Republicans during the rally at Barnard College. “They want to keep you scared.” Really? Isn’t that what President Biden’s speech just did, try to scare us?
And what is the existential threat the Democrats are warning of? Well, of course it’s Donald Trump and his “ultra-MAGA” acolytes. President Biden said in his speech there were 300 of those ‘ultra-MAGA” types running neck and neck with Democrat opponents, and they are “election deniers” that can’t be allowed to win. Ironically, the Democrat spent lots of money helping these same GOP candidates win their primaries against supposedly more “moderate” opponents, assuming they would be easier to defeat in the general elections. I guess the lesson here is “Be careful what you wish for or pay for.”
This is the fourth election cycle since 2016 where the Democrats spun melodramatic narratives of threats to democracy where no claim about Donald Trump or Republicans became too outlandish. Collusion with Russia! Institutions crumbling! Rule of law—gone! Climate melting down, voter suppression, insurrection and racists and bigots running rampant. Along the way, the left insisted its policies were the only way to save humanity: If you want to rescue “democracy,” kill the filibuster, eliminate fossil fuels, put the federal government in charge of voting, censor “disinformation,” raise taxes, forgive student debt, expand entitlements, and be grateful for all the “freedom” this agenda will bring.
The problem with this narrative is that Donald Trump is not on the ballot and the American people have had two years to observe the real effects of aggressively ideological and unserious Democrat policies. Their outrageous spending and war against fossil fuels has ushered in the worst inflation since the 1970’s. And like the 1970’s, the stock market—and our savings- are getting hammered. Their defund-the-police movement produces soaring crime. Blue-state school lockdowns set kids back by years. Our southern border is being invaded by illegal immigrants at the highest rate in our history. And worst of all, the Democrats are working tirelessly to make sure that race-gender-sexual identity filters are used in every aspect of our society from schools to federal spending to employment.
Most American voters have experienced the results of these policies and are deciding that they have seen enough. According to the October 17, 2022 New York Times/Siena College National Survey, 44% of likely voters say the economy or inflation are their top two concerns — including 58% of Republicans, 34% of Democrats and 40% of independents. That’s a 9% jump from the same poll in July when 35% picked those issues. In the July poll, 5% of voters selected abortion as a top issue, including 10% of Democrats. The latest survey shows abortion still at 5% overall, but down 2% among Democrats. In the most recent Wall Street Journal poll, 64% of respondents said this midterm is “more important” than most elections. Asked why, the categories that got the significant majority of support included “we need change,” “current administration failing,” “anti-Democrat,” “fiscal issues,” inflation, crime and immigration. Only 13% listed “democracy in danger” and 12% “anti-Republican”—Mr. Biden’s constituency.
The Top Issue – Public Spending and National Debt
American citizens want a governing class that acknowledges the real problems, presents a serious plan for tackling them, works in regular order and, most importantly, acts like an adult. In the opinion of many important economists, one of the most important problems is being ignored by all Democrats and many in the GOP. This is the financial doom loop our exploding national debt is creating. You know, the vicious circle where our government borrows to pay interest which generates yet more interest and yet more borrowing and the interest on national debt crowds out all other spending priorities. The difficult political decisions that will have to be made will create a lot of disorder and pain. I have been talking about this for at least 4 years between in my book and podcasts. Now it seems like we are here. Let’s unpack this a little.
On October 2, 2022, the US Treasury announced that our national debt increased to $31.1 trillion. Outstanding debt has climbed nearly $8 trillion since the beginning of 2020. And it has jumped by $1 trillion in just eight months. Covid stimulus, the recent hilariously named $1 trillion “Inflation Reduction Act”, student loan forgiveness. It doesn’t matter, The amount of federal tax revenue we collect is more than $1.5 trillion less than we spend. The gross interest expense on the national debt hit $88 billion in August, according to the Monthly Treasury Statement. That’s $1.06 trillion a year. The August numbers barely reflect the impact of the Fed’s interest-rate hikes between March and November, much less by the Fed’s new guidance of higher rates for longer. Given that, it’s highly likely that interest expenses will rise above $1 trillion a year and surpass Social Security as the largest item in the federal budget.
The Fed is doing the only thing it can, which is trying to reduce demand by making it much more expensive to borrow money. The most obvious example of this is that mortgage rates in 2020 were in the 3.5% range. Now they are 7-8% and going higher. The result is lower demand for homes which results in job losses for the millions of people in the construction industry. This rise in the cost of borrowing ripples throughout the economy. You may be asking yourself, “It seems like the Fed is trying to create a recession?” You would be exactly right despite what their public comments are.
Yet even if the Fed backs off, or recession intervenes, that won’t relieve pressure on Uncle Sam. Treasury debt has reached record levels, and higher federal interest expenses are already baked in. That will hinder the government’s ability to provide fiscal stimulus during the next recession. Constrained or not, the government will surely try to do so. That means issuing more debt, since the federal budget is in perpetual deficit.
Modern Monetary Theory (MMT) drives policy throughout the world’s central banks, and it beleives that as long as the economy is growing at a faster rate than the debt, the increase in the national debt doesn’t matter. But that certainly isn’t happening now. The national debt has exploded and, along with it, interest expense. The current $800 billion annual net interest expense on the $31 trillion of publicly held debt implies a required economic growth rate of more than 3% in a $25 trillion economy in order for the debt “not to matter.” The average forecast for economic growth in 2022 is less than 1%, and many economists expect negative growth—i.e., recession—in 2023.
Naturally, if we do plummet into a serious recession, federal income-tax revenue will erode. Even before recession, the past nine months of declining stock and bond prices virtually assure an almost complete collapse in capital-gains-tax revenue come tax time next April. Loss of that category alone—which averages about 12% of federal individual income-tax revenue—will necessitate hundreds of billions in borrowing to replace lost revenue.
Inflation and interest rates are inflicting painful damage today. Yet seemingly without notice the national debt is working like a cancer sapping the nation’s long-term economic vitality. Whether we reach the “doom loop,” or just become mired in stagflation, unchecked government spending and mounting national debt will drain all growth potential from the national economy sooner rather than later. This is everyone’s problem.
Ok folks, this article is shorter than usual because I wanted to get it out by election day. This national debt issue is the most important issue not being talked about. Now I have published, and it’s time for me to vote. Please vote today. It’s important. And remember, United We Stand, Divided We Fall, Each One for the Other and All for All.