Budget

The Debt Ceiling and the Duopoly

By David Stockman  |  July 23, 2019

They say partisan rancor will be the end of us. I say it’s the duopoly’s bullshit that ultimately takes this whole glorious experiment down for the count.

Look no further than this putrid arrangement conceived on Capitol Hill and delivered by the Tweeter-in-Chief:

I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy – on a two-year Budget and Debt Ceiling, with no poison pills….:

Zero-sum Republicans ate status quo/ “good governance” Democrats’ lunch again, proving there is no “resistance” that really matters. You need not guess how Republicans behave when the roles are reversed and there’s one of theirs in the Oval Office.

As For Their Partners In Crime…

they stand up for social equality and lie down for Wall Street. This is how the game is played.

Still, it’s hard to imagine the guy who once tweeted this

America has lost its AAA rating and gained over $6T in debt under

@BarackObama and now he wants to raise the debt ceiling–SCARY!

… not merely meekly surrendering but overtly celebrating another big expansion of the federal budget.

Indeed, it’s another addition to the president’s ever-expanding irony-of-ironies list. The numbers show that we had more fiscal restraint under Obama (that’s the blue line) than we do under Trump (the orange line, of course).

And the Donald’s numbers will only get worse with this new deal.

Debt On Debt

The Treasury Department’s borrowing authority has been extended through July 31, 2021, so Uncle Sam won’t default later this year.

Thanks to “weeks of closed-door negotiations” and “a delayed commercial flight to Washington following a speech [Pelosi] delivered earlier in the day in Detroit,” we’ve been spared that fate.

But we are adding a lot to the budget deficit and the federal debt.

Spending on “discretionary” programs is set to rise to $1.37 trillion for fiscal 2020, which starts on October 1, 2019. That’s up from $1.32 trillion for fiscal 2019. The budget for fiscal 2021 is $1.375 trillion.

They’ve set a cap on military spending, a maximum of $738 billion next year, up from $716 billion this year. Non-defense appropriations are capped at $632 billion, up from $605 billion.

Folks, they’re not even pretending anymore. When they want to get business done in Washington D.C., they get business done. There is no such thing as “moral leadership.”

What Now With The Federal Reserve?

“The federal debt ceiling” was one of “a number of government policy issues” that had “yet to be resolved” when Jerome Powell testified before the House Financial Services Committee on July 10.

Trade and Brexit were the others, but those, by now, are known “unknowns”… even with the Donald’s doppelganger Boris Johnson now occupying 10 Downing Street.

Were our monetary central planners’ decisions on policy really dependent on data that matters to Main Street we’d be talking about… something else because interest rates would be “normal.”

Alas, having declared itself to be the global broom and shovel brigade, the Fed and its acolytes must now do… something.

That amounts to traveling behind the moveable circus of politicians and policymakers and cleaning up their droppings, whether large or small, so their follies may not impinge on the growth rate of U.S. gross domestic product. Apparently to the decimal point.

No partisan food fight over the debt ceiling?

No problem! There’s always Boris Johnson’s Brexit to fret and the Donald’s insane Trade War to fight… It’s the epitome of institutional arrogance, a type of mission creep that’s common among the elite.

They always find a way to get what they want and what they need.

Never mind, Main Street…

Is Your Money That Good?

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR