When the WaPo deigns to notice, you know something is up.
The price of money printing.
Which begat the inflation. Which begat the rate hikes. And thus unto the seventh generation.
Every dollar of deficit is stimulus, whether you call it that or not. Run one of those Einstein Gedankenexperiments on this question: What happens to the U.S. economy if you raise taxes (or cut non-mandated spending) enough to fill the budget gap.
The WEF says Einstein changed the world with his thought experiments. I don't think we can claim any such far-reaching effects beyond maybe the acknowledgement that huh, the U.S. economy would collapse.
It's a house of cards, built on sand, with the tide rising.
And there's a hurricane approaching.
From the Washington Post, September 3:
A strong economy usually reduces the deficit. Not this time.
The unexpected deficit surge, which comes amid signs of strong growth in the economy overall, is likely to shape a fierce debate on Capitol Hill about the nation’s fiscal policies as lawmakers face a potential government shutdown this fall and choices over trillions of dollars in expiring tax cuts. The Senate will return this week from August recess, and the House will be back the following week. Biden and House Speaker Kevin McCarthy (R-Calif.) approved a deal in June to raise the nation’s borrowing limit, but it did little to alter the long-term debt trajectory.
The higher deficit may undermine Biden’s attempts to take credit for reining in the budget ahead of the 2024 presidential election. And it could pose a challenge to Republican lawmakers, who — despite their calls for fiscal responsibility — are pushing to extend more than $3 trillion in tax cuts they approved in 2017.
“The deficit will basically double from 2022 to 2023,” said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget. “This should prompt a serious evaluation of federal policy going forward, though I worry it won’t.”
The surge in red ink has confounded many economists’ expectations. Typically, deficits contract when the economy grows, because businesses and consumers owe more in taxes and the government does not need to spend as much to protect those who have lost their job. Then deficits normally expand again in downturns, as those factors go into reverse. And yet the current surge in the deficit is coinciding with a period of unusually strong economic growth, amid historic lows in unemployment and robust corporate profits.
Jason Furman, who served as a top economist in the Obama administration and is now an economics professor at Harvard, said the current jump in the deficit is only surpassed by “major crises,” such as World War II, the 2008 financial meltdown or the coronavirus pandemic. Only during these national catastrophes did the United States see deficit numbers this large as a share of the economy or this substantial an increase in the deficit, Furman said. The U.S. economy is expected to grow at a steady 2.1 percent this year.
“To see this in an economy with low unemployment is truly stunning. There’s never been anything like it,” Furman said. “A good and strong economy, with no new emergency spending — and yet a deficit like this. The fact that it is so big in one year makes you think it must be some weird freakish thing going on.”....
....MUCH MORE
Here's one tiny (in comparison) factoid on the spending. The Microsoft carbon deal we posted on yesterday was contingent on the carbon credit purveyor getting a government grant:
....Additionally, the deal is an example of the impact of the Biden administration’s 2021 infrastructure bill: the purchase was tied to Heirloom being selected by the U.S. Department of Energy as one of the nation’s direct air capture (DAC) hubs. It will receive $600 million of matching funding thanks to the designation....
Here's another Gedankenexperiment:
What happens when the game can no longer be sustained?
And possibly more important: What will you do then?
