So I bet you didn’t know that on January 19th, the US government debt limit will hit its $31.4 trillion ceiling. It’s next Thursday, please mark it on your calendar.
It’s not really that big of a deal. For one reason, the US government will never run out of money because its central bank controls the official printing. Think of it like a printer on your personal computer. You press the print button and the copy just comes out. Alas Until the Ink Runs Out But Uncle Sam’s Ink Never Runs Out! That’s the beauty of this story. So where am I going with this? Well, I’m not sure, but stay with me.
What actually happens is that the US Treasury finds a whole bunch of reserve cash all over the government that will fund all the budget spending. They usually do this by delaying federal and military pensions because those funds run large surpluses. They always have money. The money is then returned to the fund. So no one loses.
Clearly, the total debt of $31.4 trillion is higher, much higher, than our entire economy. Nominal GDP is 23 trillion dollars. So it’s not good. An even more accurate number that is marketable debt in the hands of the public, right? These are the bonds that the Treasury auctions every week, and you may have some in your retirement account, but even the national debt is at $24 trillion, which is more than 100% of our economy, and that’s not good either. :
YELLEN WARNS WE’RE GOING TO PAY THE DEBT LIMIT NEXT WEEK
Now the new Republican Congress has said with great clarity that it will not allow an automatic increase in the debt limit unless and until there is sufficient reduction in budget spending, reduction, and they are right.
Now, Joe Biden, the Democrats are going to do everything they can to point the finger at the House GOP and blame them for defaulting on the debt or shutting down the government.
My answer to all that is: First, we are never going to default on our US debt. Never. We are the world’s reserve currency and will always remain so. But, and this is a big but, if deferring interest payments on the 10-year Treasury bond was to significantly reduce federal spending, then I’m all for it, I’m all for it.
Anyway, let’s not forget that income always comes every day. Tax revenues – lots of tax revenues. File federal tax returns. So there is always plenty of cash flow to cover our debt interest payments, even if the debt ceiling raise is delayed. In other words, that whole argument is a red herring. That’s it.
Now Kevin McCarthy and company are going to call Biden’s bluff, as well they should. As we’ve discussed many times on this show, the GOP will move to regular budget order, which means new budget chairman Jody Arrington and his committee will set a new budget formula that includes spending ceilings and revenue floors and will include major rollbacks. on recent Democratic spending increases.
That budget decision then goes to the Appropriations Committee, whose 12 appropriations subcommittees will come up with spending totals and policy. There will be an open, accountable, transparent process all along the way, with public hearings and experts on both sides of the aisle.
The era of 4,000-page omnibus bills is over. That’s a promise made by the new House GOP, and I bet they’ll keep it. Senate Democrats are going to squeal like stuck pigs. Joe Biden would love to squeal with them, but he has a leaked documents scandal of his own that will sideline him for a long time. Maybe for the rest of his political career.
In fact, the Biden classified documents scandal is a huge blow to the entire Democratic Party, even though they are in complete denial at the moment. Even the mainstream liberal media is trying to figure out what top secret Iranian and Ukrainian information was doing in Mr. Biden’s Corvette, and if that group is turning against him, he’s in big trouble indeed.
So, I suggest that while the House budget debate will continue for many months, Mr. Biden’s political self-righteous, indignant rant at his arch-nemesis Donald Trump, well, I think those days. are finished.
CLICK HERE to get the FOX NEWS app
For those who disagree with my political analysis, I respect your point of view. Maybe I’m jumping to conclusions, but I think the Biden classified documents scandal is antithetical to the new era of budgeting that the new House Republicans have cooked up. In fact, this juicy fiscal meal will be cooked on a gas stove.
After all, when political and fiscal power is wrested from the sclerotic and clogged arteries of democracy, it can re-oxygenate the faltering economy of the stock market. Just think about it. They are all connected.
This article is adapted from Larry Kudlow’s opening commentary in the January 13, 2023 edition of Kudlow.