So, I’ll bet you didn’t know that on Jan. 19, the U.S. government’s debt limit is going to hit its ceiling: $31.4 trillion. That’s next Thursday, please mark it on your calendar.
It’s actually not that big of a deal. For one reason, the U.S. government’s never going to run out of money because its central bank controls the official printing press. Think of it as, kind of like, your own personal computer printer. You hit the print button and the copy just comes flowing out. Oops! Until you run out of ink, but Uncle Sam never runs out of ink. That’s the beauty of this story. So, where am I going with this? Well, I’m not sure, but stay with me.
In fact, what happens is the U.S. Treasury of Secretary finds a whole bunch of spare cash throughout the government that will finance all the budget spending. They usually do it by delaying retirement money for federal and military staff, because those funds run big surpluses. They always have the money. Then the money is paid back later into the fund. So, no one loses.
Obviously, $31.4 trillion in total debt is higher — much higher — than our entire economy. The nominal GDP is $23 trillion. So, that’s not good. Even the more accurate number, which is marketable debt in public hands — right? Those are the bonds the Treasury auctions every week and you may own some in your retirement account, but even publicly held debt is coming up to $24 trillion, which is over 100% of our economy, and that’s not good either.
YELLEN WARNS THAT US WILL HIT DEBT LIMIT NEXT WEEK
Now, the new Republican Congress has said with great clarity that it will not permit any automatic increases in the debt limit unless and until there is a satisfactory reduction in budget spending — a reduction, and they are right.
Now, the Joe Biden Democrats are going to do everything they can to point the finger at the GOP House and blame them for defaulting on the debt or shutting down the government.
My response to all that is: So what? First of all, we’re never going to default on our U.S. debt. Never. We are the world’s reserve currency and we will always keep it that way. But, and it’s a big but, if there were a delay in paying the interest on a 10-year government bond in order to significantly slash federal spending, then I’m all for it — I’m all for it.
Anyway, let’s not forget revenues are always coming in every day. Tax revenues — lots of tax revenues. Record federal tax revenues. So, there’s always plenty of cash flow to cover the interest payments on our debt, even if the debt ceiling increase is postponed. In other words, all that argument is a red herring. That’s all it is.
Now, Kevin McCarthy and company are going to call Biden’s bluff, as well they must. As we have discussed so many times on this show, the GOP will move to regular budget order — which means new Budget Chair Jodey Arrington and his committee will set a new budget resolution, which prescribes spending ceilings and revenue floors and will include a major rollback of the recent Democratic spending binge.
Then that budget resolution goes to the Appropriations Committee, whose 12 appropriation subcommittees will come up with spending totals and policies. All along the way, there will be an open, accountable, transparent process, with public hearings and experts on both sides of the aisle.
The era of 4,000-page omnibus bills is over. This is a pledge made by the new House GOP and I’m betting they’re going to keep it. Senate Democrats are going to squeal like stuck pigs. Joe Biden would like to squeal with them, but he’s got himself a classified document scandal problem that is going to neuter him for quite some time. Maybe for the rest of his political career.
In fact, Biden’s classified documents scandal is a big body blow to the entire Democratic Party, though they are at the moment in complete denial about it. Even the mainstream liberal media outlets are trying to figure out what top-secret Iranian and Ukraine information was doing in Mr. Biden’s Corvette, and if that bunch is turning against him, he’s really got a big problem.
So, I’m suggesting, even though the budget deliberations in the House are going to go on for many months, the politically self-righteous, indignant yelping by Mr. Biden at his arch-enemy Donald Trump — well — I think those days are over.
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For those who disagree with my political analysis, I respect your point of view. Maybe I’m jumping to conclusions, but I think Biden’s classified docs scandal crossruffs to a new budget era being cooked up by the new House Republicans. Actually, this juicy fiscal meal will be cooked up on a gas stove.
Finally, as political and fiscal power drain away from the sclerotic and clogged Democratic arteries, it could re-oxygenate a shaky stock market economy. Just think of that. They’re all related.
This article is adapted from Larry Kudlow’s opening commentary on the January 13, 2023, edition of “Kudlow.”