Bubble

NEWS!

Spending our Way to a Fiscal Crises!

Ron Paul

According to financial writer Simon Black, the federal government is spending approximately 52,000 dollars per second. This, not last year’s tax cuts, is the reason why the national debt has reached a record 21 trillion dollars, which is more than America’s gross domestic product (GDP). 

Another ominous sign is that this year both Social Security and Medicare will have to draw down on their reserve funds to be able to pay benefits. The Social Security and Medicare trust funds will both soon be bankrupt, putting additional strains on the federal budget and American taxpayers. 

The excessive debt caused by excessive spending will inevitably cause a major economic crisis. Yet, with a few notable exceptions, there is little to no desire in Washington to cut spending. Instead, both parties are committed to increasing spending on warfare and welfare while ignoring the looming entitlements crisis. 

When the economic crisis hits, there will be no choice but to cut spending and raise taxes. Of course, Congress is unlikely to raise taxes or cut benefits. Instead, it will rely on the Federal Reserve to do the dirty work via the inflation tax. The inflation tax is the worst type of tax because it is both hidden and regressive. 

One of the worst features, if not the worst, of the tax reform plan is increasing the inflation tax by authorizing the use of “chained CPI.” Chained CPI hides inflation’s effects by claiming that rising prices do not harm Americans as long as they can still afford low-cost substitute goods to replace products they can no longer afford due to the Federal Reserve’s devaluation of the currency — as if people forced to buy hamburger instead of steak are not negatively impacted by inflation.

Increasing federal debt will also put pressure on the Federal Reserve to keep interest rates low to prevent federal interest payments on the debt from skyrocketing.  Eventually, the Fed’s monetization of the debt will lead to hyperinflation and a rejection of the dollar’s world reserve currency status. 

The question is when, not whether, the welfare-warfare state and the fiat currency system will end. Hopefully, those who know the truth will succeed in growing the liberty movement so we can convince Congress to gradually unwind the welfare-warfare state, restore a true free market in money, and stop trying to run the world, run the economy, and run our lives. 

 DYI