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October 18, 2018 | The Foxes Are in Charge of The Swamp

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

HAMILTON, BERMUDA – Hmmm… The plot thickens.

The Trump team came into office with what might have been a historic opportunity to drain the Swamp and take the feds down a peg. Mr. Trump even said he would eliminate the national debt in eight years.

Instead, he teamed up with Democrats to crash through the debt ceiling, gave the big spenders at the Pentagon even more money, cut taxes, and made the Swamp even deeper.

Predictably, tax revenues declined and the deficit rose. And the national debt went up by more than $1 trillion over the last 12 months.

From The New York Times:

Personal tax receipts are up on their own, but corporate tax receipts are down by about a third from a year ago.

That overall drop looks worse when you consider inflation. A dollar today buys about 2 percent less than it did a year ago, according to the inflation index used by the Federal Reserve to set monetary policy. So the government brought in slightly less money year over year, and that money was worth less than the equivalent amount a year ago…

 

Get Rid of the Fat

And now… what to do? Reuters is on the story:

U.S. President Donald Trump, faced with a budget deficit at a six-year high, on Wednesday told his Cabinet to come up with proposals to cut spending by their agencies by 5 percent, but he suggested the military would be largely spared.

“I’d like you all to come back with a 5 percent cut,” Trump told his Cabinet secretaries at a meeting attended by reporters.

“If you do more than that, we will be very happy. There are some people sitting at the table… that can really do substantially more,” he said.

“Get rid of the fat. Get rid of the waste.”

Senate Majority Leader Mitch McConnell is on the case, too.

Per Newsweek:

“It’s disappointing, but it’s not a Republican problem,” McConnell said of the deficit, which grew 17 percent to $779 billion in fiscal year 2018. McConnell explained to Bloomberg that “it’s a bipartisan problem…”

Here at the Diary, we look at the passing parade in Washington through a cynical lens…

No situation is so hopeless… so absurd… or so disastrous that the feds can’t make it worse. No policy is too stupid… too counterproductive… or too corrupt that it can’t become the law of the land.

And no man is too craven… too degenerate… or too much of an imbecile to be disqualified from public office.

 

Political Fantasy

McConnell is right. It’s a bipartisan thing – a bipartisan opportunity to rip off the public.

Each side feigns a sincere and everlasting commitment to serving the public. And neither wishes to disappoint its own contributors, supporters, voters, and cronies.

This leaves the two parties with more in common than in contrast. That is to say that, as former governor of Alabama George Wallace once put it, there’s hardly a dime’s worth of difference between them.

Each looks out for the interests of the governing insiders – the public be damned. The differences are merely cultural and aesthetic.

We are aware that this runs deeply counter to the reigning political fantasy.

The red voters think the blue voters are devils. The blue voters think it’s the red voters who have tails and horns. Each believes its own party leaders are a mixture of Gandhi and Solomon.

As for the opposition, it’s as evil as Attila and as dumb as dirt.

This “us versus them” approach to politics serves both parties well. It keeps the voters entertained, engaged, and distracted.

The fans are so busy rooting for their favorite team, they don’t notice that both teams are actually on the same side; they are part of the elite… the beneficiaries of the Deep State policies.

 

Looting Main Street

Every society needs an elite… and gets one, whether it wants it or not.

Some people are naturally stronger, more ambitious, or more cunning than others. No matter what you call these insiders, they take over…

As the great Italian economist Vilfredo Pareto put it, the “foxes” always figure out how to use the government for their own benefit.

The average person has neither the time nor the skill to dissect the federal budget, for example. He relies on his elite – like accountants with the Congressional Budget Office or experts on the White House economic council… and members of Congress and functionaries in the administration – to work through the numbers and make sure they make sense for the nation.

This works passably well when governments are smallish and newish. Early in the cycle, the elite helps to keep the show on the road. Later, it drives it into a ditch.

Over time, the system degenerates and the elite becomes parasitic. Then, the foxes’ interests are no longer aligned with those of the common man.

Instead, the elite looks for ways to deceive – not serve – the public… and to use federal finances for its own purposes, essentially looting the Main Street economy in order to reward itself.

The voters don’t have any way of knowing or understanding what is really going on. But they sense that something is wrong.

Elizabeth Warren’s DNA… Brett Kavanaugh’s teenage years… and transgender bathrooms seem like distractions. And 40 years without a real pay hike feels suspiciously like robbery.

For many years, Republicans and Democrats have fought over the middle ground… trying to capture the marginal voter in the center.

But now, the middle is where the toxic problem is… in the Swamp… full of slithery, slimy, self-interested hustlers… chockablock with fantasies and distractions.

So the voters move to the left, away from Hillary Clinton and towards Bernie Sanders… or to the right, away from Jeb Bush and towards Donald Trump.

Trump played the role brilliantly, promising something new with such gusto and novel forthrightness that much of the public believed him… and still do.

So far, none of his deals and deal-making have made much sense to us. But if he could lop 5% off the federal budget, it would definitely be a welcome and unexpected achievement.

Our prediction: The sun will rise tomorrow at the accustomed time. The deficit will widen. And spending will go up, not down.

And the debt will continue to increase.

Regards,

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Bill

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October 18th, 2018

Posted In: Bill Bonner's Diary

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