Speaker Johnson’s First and Last Hurrah
It’s a good thing the House GOP elected a “real” Republican leader the other day. In his debut action the new GOP Speaker kept the government open, by golly, and did so with a huge majority of, well, Democrats!
That’s right. Among the 336 votes for Johnson’s “no cuts” continuing resolution 209 or 62% were Democrats. By contrast, among the 95 nay votes, 98% were cast by Republicans. We’d guess the two Dems who voted “nay” may possibly be color blind.
Voting Station on US House Floor
In any event, the public debt weighed in at $16.4 trillion in 2013, and it had taken 226 years to get there. Now, in single decade that figure has doubled to $33.2 trillion and we are just getting started. Given the built-in policy deficits and another overdue recession in the next year or two, we will be at the $50 trillion mark well before the end of the current decade.
To put it more dramatically, we recall well the angst that overcame the Reagan White House in early 1981 when it became necessary to raise the debt ceiling above $1 trillion to finance the red ink inherited from Jimmy Carter. Whatever was the financial equivalent of turning into a pillar of salt, believers in the old-time GOP religion of balanced budgets feared it was about to happen.
No more. The public debt has gone from $1 trillion to what will be $50 trillion in barely five decades. And yet today’s GOP cannot even seem to elect a Speaker who will take a stand for even the mildest gesture of fiscal restraint.
To be sure, both Jimmy Carter and Ronald Reagan promised to balance the Federal budget by the end of their first terms, respectively. Both ended-up being inundated in red ink, but as a matter of the historical record they both did at least give lip service to fiscal responsibility.
Now the parties of both Carter and Reagan have been supplanted by the careerist-dominated Uniparty domiciled on the banks of the Potomac. The latter no longer even try to contain the debt, let alone balance the budget. In fact, by our count we have had four successive Republican Speakers in the last decade who have opted over and again to keep the lights on at the Pentagon, HSS, the Education Department and the Washington Monument, too, whenever push-has-come to shove on the legislative calendar.
And yet, and yet. We just had another inflation report for October that said the 16% trimmed mean CPI posted at 4.11% on a Y/Y basis, even as they were buying 10-year USTs today hand-over-fist in the bond pits at a yield of 4.45%. In other words, fiscal Armageddon is visibly barreling down the tracks, yet these cats are buying Uncle Sam’s IOU’s due a decade from now at a real yield of just 34 basis points!
And that’s not the half of it. The blue bars (10-year UST yield) sticking ever so slightly above the running inflation rate (red bars) during September and October 2023 in the chart below represent the first time in the last five years that the real yield on the benchmark bond of the world’s most voracious borrower was actually above zero.
Needless to say, there is no way this is remotely sustainable unless the Fed cranks up the printing presses right soon, but, alas, that’s not possible, either. As long as the running inflation rate remains in the 4% /- zone, even the
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