This article was published by The McAlvany Intelligence Advisor on Good Friday, April 10, 2020:
Never one to pull his punches, David Stockman, Reagan’s former OMB Director, unloaded at LewRockwell.com:
[CARES] … the greatest folly ever to beset our [country] is now racing full speed ahead.
Instead of belt-tightening, work-arounds, payment deferrals and negotiated price and wage adjustments for a few months … current and future taxpayers are being saddled with trillions of unnecessary obligations, which will prove to be the final straw on the debt-ridden camel’s back….
Because the ship-of-fools in the Eccles Building [which houses the Federal Reserve’s Open Market Committee] have led Washington and Wall Street alike to believe in what amounts to the greatest lie in financial history: that we can borrow and print our way back to prosperity!
His article is already out of date. The Fed and the Treasury are doubling down, adding an additional $2.3 trillion to the economy in the belief that such a flood can hasten the end of the economic depression caused by the powers-that-be.
That makes attempts to measure the real amount the Treasury owes by Truth in Lending and Boston University professor Laurence Kotlikoff irrelevant.
On April 7, Truth in Lending, the non-partisan think tank that tries to provide an accurate (read: full accounting of all promises) measure of the government’s true financial condition, released its latest report.
Instead of repeating the canard that the national debt is only around $23 trillion, it reported that the federal government actually owes more than $113 trillion when “off-budget” items like Social Security and Medicare are added back in.
For this, the think tank gave the Federal government a financial grade of “F.”
The report didn’t take into the account the CARES Act.
Professor Laurence Kotlikoff has developed the “intergenerational accounting” protocol that measures the amount of the real debts owed and promises made, and has come up with his number: $222 trillion.
To those numbers must be added somewhere between $6 and $10 trillion, thanks to CARES and Stockman’s “ship-of-fools.”
One of those riding in Stockman’s ship of fools is Neil Irwin. Trained in Keynesian economics at Columbia University and previously a columnist and reporter at the Washington Post, Irwin declared that that printing and borrowing was “a good thing.” He wrote: “The only thing worse for the public debt outlook would be if it didn’t [borrow].”
The very large deficits on the way in 2020 are more likely to leave the United States in a better fiscal situation for the years ahead than an alternative in which the government is more tightfisted but fails to prevent the widespread collapse of American businesses or help workers in desperate financial straits.
He claims that the borrowing won’t cost much because interest rates, thanks to the Fed, are way below normal. Besides, said Irwin, “this spending is meant to last only as long as needed … it should be a one-time increase to public debt rather than an increase to permanent deficits.”
In addition, writes Irwin, the government’s budget can’t be compared to a household budget, because “the government never need pay down its debt … the debt can remain on the books indefinitely.”
There it is: Keynesian economics in all its glory. The Treasury can borrow without limit because 1) interest rates are low and 2) it never has to pay it back. With interest rates at zero, it’s like free money!
What the CARES act does is hasten the day of reckoning that Stockman has been warning about ever since he resigned as OMB director in 1985. For those ready to see how it ended in Zimbabwe, Philip Haslam’s When Money Destroys Nations: How Hyperinflation Ruined Zimbabwe, How Ordinary People Survived, and Warnings for Nations that Print Money gives abundant evidence as to where Stockman’s ship-of-fools is taking us.
LewRockwell.com: Not Your Grandfather’s Recession, by David Stockman
NYTimes.com: Stockman Resigns Top Budget Post
Truthinaccounting.org: Federal Government’s Financial Condition Worsened by $8 Trillion in 2019
FederalReserve.gov: Money Stock and Debt Measures – H.6 Release