Wednesday, December 22, 2021

Manchin Saves Biden from His 3Bs: Build Back Better or Budget Buster Blunder?

Not since President Lyndon Baines Johnson’s 1960’s launch of his “War on Poverty” has an administration proposed such sweeping changes to the welfare state as Biden has in his 2021 with the “Build Back Better” (BBB) plan. Not surprisingly, LBJ and subsequent presidents pushed the federal debt for each U.S. resident from just over $1,600 in 1965 to almost $90,000 in 2021.

Despite Biden’s assertion that BBB would cost $0, the Congressional Budget Office (CBO), the official budget scorekeeper, estimated that even with budget gimmicks, BBB will expand the debt by $454.1 billion over the 2022-31 period.

BBB is on top of four major Trump and Biden 2020-21 stimulus programs and Federal Reserve (FED) expansion efforts.

These programs sprouted:

*A 2021 budget deficit of more than $2.77 trillion, the second highest on record. Primarily responsible for the ballooning deficit and debt were:

**2020’s $3.6 trillion stimulus,

**2021’s $1.9 trillion stimulus,

**and a yet-to-get rolling $1.2 trillion infrastructure program passed in 2021.

In order to support the spending packages, the FED purchased $4.5 trillion of U.S. Treasury bonds, and reduced short-term interest rates to 0% - ¼%. This had the impact of increasing the money supply by 37.5%, and boosting the annual inflation rate from less than 2% to over 6%.

Due to the massive 2020-21 overspending, the U.S. debt will exceed $30 trillion by the end of 2021 even before the rollout of the infrastructure program and BBB.

Who pays, or will pay, for this fiscal indulgence? There are those in the political class that assume that, due to ultra-low interest rates, and the FED money creation, this lavish party has no end. But as the Nixon Administration’s Chief Economic Advisor, Herb Stein, once said, “If something cannot go on forever, it will stop.”

Current interest payments on the federal debt average a bargain 1.77%. Should rates on the debt rise to the post-2000 average of 3.48%, each U.S. worker would have to belly-up approximately $3,200, or federal spending would have to be slashed by approximately $485 billion, or a combination of both poisons.

Senator Manchin of West Virginia, by stopping BBB in its tracks, has saved Biden from his Budget Buster Blunder.

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