While You were Sleeping
All eyes seem to be on Afghanistan, and with good reason. This may be President Biden’s Iranian Hostage moment. Some of you may recall that back during President Carter’s administration (November,1979), the US Embassy in Tehran was overrun and most of the people assigned to the Embassy were taken hostage. Negotiations went on for months and finally ended in January 1981. The crisis destroyed Carter’s Presidency and helped put the Ayatollah Kohmeni in power. It was a devastating series of events and it took years and Ronald Reagan to bring this country back to a place of pride and importance. Will the Afghanistan crisis do that to President Biden? Will this carry through his Presidency? That is the question that is being asked around town and I just want to mention this as an added thought, Jimmy Carter was a good man(still is) but not a very good President. Joe Biden is similar in that many feel he is a good man but he is turning out to be a weak President. I know, it’s only seven months and the jury should still be out on this but the facts are starting to pile up.
With all that going on it is important to remind everyone that while we were occupied elsewhere, House Democrats passed that 3.5 Trillion dollar budget resolution. Yes they did! Seriously. As you know by now, I am not a big fan of huge spending bills. I agreed last year that the Federal Government needed to step in and support those affected by Covid. Unemployment expansion, PPP, and the assorted goodies that were tossed to the masses were all well and good but the economy got back on it’s feet fairly quickly and I really did not think any major additional support was needed. Not so fast, said the Democrat controlled government, we have more goodies, and more goodies. So the Federal Government is flooding the country with cash and then they decide to spend even more money with this latest attempt at buying the future of their party.
Let’s be honest, we did need some sort of infrastructure infusion. State and local governments just can not afford the upkeep on what they have and Federal money will go a long way in helping. I have no issue with a standard infrastructure spending increase. It’s the hundreds of billions of dollars of money being allocated to God knows what that was tucked into this bill. Oh well, whats done is done.
Now we have another spending bill that makes those 60’s Pork Barrel bills seem like the cash haul from a church Bingo night. 3.5 Trillion dollars for what? It’s a budget resolution bill so to me that just means it’s the next budget for the Federal government and apparently, it will only need a majority in the Senate to pass. This should happen in the fall sometime and at that time, we will then be saddled with an additional one trillion dollars in debt to an already bloated balance sheet.
The spending will be wild but the hangover will be worse. This is just a very powerful way to keep the status quo in Washington and it is a time proven method of keeping one party in power. Spend till it hurts and then spend some more. The economy will roar and people will be back working at high paying jobs and America will never look back. Yeah, ok. I just am very leery of massively increased government spending when there is no war going on. The government is becoming more and more important in our daily lives and overstepping the multiple functions of what a good government should be. The more dependent we become to government spending, the less inclined we are to change that government and that is the core of what these massive spending bills are.
And we didn’t even mention one really tasty result from all this government spending, increased inflation. Yes, the results from major upticks in government spending is always inflation. We already are seeing an inflationary spike (not transitory, just like I said five months ago) and increased spending will just add to that. We know that the Federal reserve is rethinking their projected targets for inflation knowing that they will be winding down their bond purchases by January (inflationary when done) and knowing that in 2022 we will be seeing a substantial increase in government spending as well. Not a pretty picture and the Feds main weapon is raising interest rates to combat inflation. What does that tell you about 2022? Will the Fed up their inflationary target to 3.5%? I think you can be pretty sure they will do something in the coming months to prepare everyone for a very rough 2022.
The administration has already had two major blunders on their ledger, will runaway inflation be the next one? Will soaring interest rates be there as well? Managing a massive economy like ours is always a major balancing act, I am just not sure if adding more weight to one side without expecting the other side to be affected drastically is sound policy. They can dump all the money in the World into the economy it won’t matter much if people feel that their lives are harder when it comes to election time.