$1.8 Trillion Annual Deficit – The Problems with Biden’s Budget

Angry Grizzly BearWith gratitude to the National Conference of State Legislatures (NCSL), their analysis of the proposed budget was broken down, and some sense was made.  Not that the news is logical, acceptable, or palatable, just that the budget documents were broken down, which was helpful.  We start with the most bass-ackwards aspect of the budget by asking one question, “Where is the money supposed to come from?”

The 2022 Budget Proposal left President Biden’s desk requesting Congress to spend $6 Trillion and add $1.8 Trillion in new deficit spending to the bloated debt the government already owes.  “Who is going to buy the bonds and make money on this debt?”  When a person employs a search engine, asking this exact question, many answers come forward, and some do not make any sense.

Peter Schiff stated:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Thus the first problem with America’s debt and proposed budget transparent; there is no money that government can spend unless it first forcefully removes it from the owner.  That is theft, or as we recently discussed, legalized theft.  The Supreme Court of the United States (SCOTUS) has ruled that legalized plunder, legal theft, or forced taxation are the price we pay for civilization, thus making legal the government’s actions to steal money.Government Largess

Let me be clear; I am not an economist.  I select several very bright and experienced people to help explain things to me.  However, I can help others with less interest in economics understand what is happening in America right now to answer the question put forward, “Who is buying America’s debt instruments?”  The simple answer is that the Federal Treasury is buying the debt instruments, as the whole world sells their bonds and other American debt instruments.  What the Federal Reserve is doing is called “monetizing debt.”

Monetizing Debt

Gravy Train 3The definition of monetized debt is as follows. “Debt monetization or monetary financing is the practice of a government borrowing money from the central bank to finance public spending instead of selling bonds to the private sector or raising taxes. It is often informally and pejoratively called printing money or money creation.”  Money can only be created in two ways: selling products and services and lending money where the borrower pays interest.  While there are many different debt instruments, i.e., credit card, home loan, student loan, bonds, Treasury Notes, etc., the principle remains the same: you either sell goods and services to make money or lend money and make money on the interest.

Why does monetizing debt matter?

Two simple reasons the government allows debt to be monetized.  To hide debt, it doesn’t want the public to know about, and to absorb cash on the market as a tool to fight inflation.  Here’s the problem, there is too much debt on the government’s books to hide it from the public any longer.  Add to that the sheer volumes of cash in the marketplace after handing out money during COVID, and the Federal Reserve will monetize debt.  Even if the chair of the Federal Reserve denies monetizing debt, debt is being monetized.Burning money - THE JOSIAH BARTLETT CENTER FOR PUBLIC POLICY

In short terms, your pocketbook is going to take another hit on the chin, and possibly two.  First, your interest rate on privately held debt, credit cards, student loans, homes, etc., is going to go up, all while making lenders nervous and refuse to lend money.  Second, inflation is already making the dollars held less valuable.

Inflation first; inflation is the devaluation of dollars.  The government floods the marketplace with cash, and the currency you hold will drop in value.  For example, recently the inflation was reported to have been 4.6% higher year-over-year.  This announcement was made in April 2021, so all the money you earned last year suddenly became 4.6% less valuable this year, all before the interest rate increases affected those dollars.Inflation - 8 Things Everyone Ought To Know.

Case in point, the US Government sent me $1000 in January; I held onto those funds due to a move that was coming and spent the money in June.  However, between January and June, inflation moved up at a steady pace, and when I went to spend that $1000, it was only worth $850.  That is the power of inflation in your pocket.

Have you asked for a credit increase recently and been denied?  What about your credit limits on your credit cards, have they shrunk?  Both are indicators that the lenders refuse to lend due to the tremendous risks caused by fiscal insanity in the Federal Government.  What about home loans, have you had to produce more documentation, prove more income, and work harder to qualify for a loan?  What about student debt?  The government controls the lending of student debt.  Even here, the Federal Government cannot demand a lender loan money to student’s and many students have found their college expenses grow, and their ability to borrow shrunk.Inflation pickpocket | Cayman Compass

In a simple fact of life, every household in America understands perfectly. When your credit scores go down, your ability to borrow reduces, and it becomes harder to meet all your bills every month.  Every city, county, state, and even the Federal Government should know this lesson, but they refuse to believe problems arise when credit scores go down.  All because those elected believe they can tax some more, and the money magically appears.

Does money magically appear in your pocket; of course not!  It must be earned through working, selling goods and services, or trading your time for employment with an employer for a paycheck.  Does the law allow you to write blank checks, kite checks, backdate checks, or simply float a check waiting for a future payday; of course not!  Yet, this is what the government is doing right now with your money.  The government is spending money, promising the lenders that a future payday will be theirs, but the government has to spend money to get money.  Does that excuse work for you when the electric company, gas company, cellphone, and other bills arrive?A Helpful Chart : How Inflation Changes Mortgage Rates

The most heartbreaking statement I have heard in a long time was recently made by a physician’s assistant, who claimed, “Aren’t we all just one paycheck from disaster?”  The simple truth, mostly, yes!  Studies exist that talk about financial resiliency in America.  Financial resiliency is all about being able to weather a patch of trouble without losing your possessions in bankruptcy.  The conclusions were all but unanimous. Along with most industrial nations, America has no financial resiliency due to government fiscal policies that hinder saving money and the need to live on credit cards to keep the basics of life paid for each month.

When inflation is stealing the value of your money, no wage can compete with government theft, all before taxes.  Add in tax laws that are counter-productive, job-killing, and increase the cost of doing business, and the job you have becomes tenuous at best.  Add in the hidden debts the government is trying to hide, and nobody in America is making money.

QuestionWhat about those who consider themselves “Rich?”

The same problems you are having with inflation are the same problems everyone is having with inflation.  Let’s go back to my $1000 that became $850 through six months of inflation.  We all spend the same money, and inflation is killing everyone’s dollar equally!  Hence, I beg you, do not allow the media hype about rich versus poor to derail the point.  Inflation and monetized debt are killing the US Dollar, which is why so many foreign investors have dumped their US Debt instruments for safer financial shores.

While some people have more financial resiliency than others, everyone’s dollar is dropping in value.  Inflation and low financial resiliency mean making budget cuts to charities, hiring someone to maintain a lawn, and a host of other ways and means American’s share our money.  It can mean turning off services, weighing how much fuel can be used, and a host of other belt-tightening decisions.  All things the government should first be doing, and they refuse.24+ Inspirational Quotes For Unemployed - Audi Quote

Yours and my liberty and freedoms depend upon stable economic policy, firm fiscal policies, and elected officials scrutinizing the government for waste, fraud, and abuse.  Yet, what do we regularly find; fraud, waste, and abuse!  The Department of Defense has lost multiple trillions of dollars; not a single politician is asking for an audit and an explanation or is willing to withhold additional appropriations until the lost money is accounted for.  The Department of Veterans Affairs continues to mismanage funds, misappropriate funds, and waste money like overripe fruit; yet, still, we have zero interest from the politicians elected to scrutinize government.

I repeat Peter Schiff, only for emphasis:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Inflation Quotes | Inflation Sayings | Inflation Picture Quotes - Page 2In redistributing your money, the government has proven they are the problem, and the solution begins locally!  Change your mayor, city council, county board, school boards, and every other elected official.  Getting the local governments in fiscal shape allows state governments to begin practicing fiscal health and sanity.  Then, we put people into the Federal Office more interested in scrutinizing the government than in writing endless laws and abdicating their legislative role to the executive bureaucrats and the judicial branch.

Knowledge Check!The budget put forth by President Biden is the height of insane, and I have only covered less than 1/10th of the budget problems in this article.  Granted, I covered the most egregious problem, but the fact that the legislative branch is even negotiating a compromise is beyond insanity and borders on criminal negligence!  We, each citizen of a representative government, must stand and tell our representatives NO MORE!  No more fiscal insanity, borrowing to buy votes, entering into debt obligations that make captives of unborn millions of other people.  No more will we allow them to buy votes to maintain power.  End the financial abuse of the taxpayer; your wallet will thank you!

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.

NO MORE BS: The Honest Minimum Wage Discussion

Calvin & Hobbes - Pragmatic PrinciplesThe following is a brief history of the minimum wage in America.

President Roosevelt asked the Secretary of Labor, Frances Perkins, “What happened to that nice unconstitutional you tucked away? [emphasis mine]”  President Roosevelt was speaking of the “Fair Labor Standards Act of 1938 (FLSA).”  The 1938 FLSA Act generally applied to employees engaged in interstate commerce or the production of goods for interstate commerce.  FLSA (1938) demanded specific workers be paid a minimum wage of $.025 an hour while also setting the maximum workweek to 44 hours.  Passing FLSA (1938) ran a gauntlet of Supreme Court (SCOTUS) decisions before and after being passed into legislation, and those SCOTUS decisions continue to influence FLSA even today.

FLSA (1938) has been revised several times by Congressional Legislation, and in 1961 Amendments extended coverage primarily to employees in large retail and service enterprises and local transit, construction, and gasoline service station employees.  It also increased the Federal Minimum Wage to $1.00, but wage disparity remained where original minimum wage earners were concerned who continued to earn $1.15 an hour.

Frank & Ernest - EconomyThe 1966 FLSA Amendments extended coverage to State and local government employees of hospitals, nursing homes, schools, laundries, dry cleaners, and large hotels, motels, restaurants, and farms. Subsequent amendments extended overage to the remaining Federal, State, and local government employees.  That was not protected in 1966 to individual workers in retail and service trades previously exempted and certain domestic workers in private household employment.  The 1938 interstate wage disparity disappeared, and the first two classes of minimum wage earners made $1.40 an hour, while nonfarm and farm employees made $1.00 an hour.

FLSA revisions in 1977 saw legislation passed to start 1978 with all covered employees earning $2.65 an hour.  This FLSA revision was important as now the wage disparity between groups of employees was finally eradicated, and FLSA finally applied to all workers.

Frank & Ernest - ITGrandfather FLSA clause – Employees who do not meet the tests for individual coverage, and whose employers were covered by the FLSA on March 31, 1990, and fail to meet the increased annual dollar volume (ADV) test for enterprise coverage, must continue to receive at least $3.35 an hour.  A piece of legislation that was a sop to the president and a contentious Congress.

FLSA revisions beginning 09/01/1997 created a subminimum wage — $4.25 an hour — established for employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer.  The FLSA revisions represented more contentious legislation that played the American worker and American Economy as pawns for personal political power.

Non Sequitur - DecisionsWhat did the minimum wage do to America?

Never forget, the actions of a legitimate government will always cause injury.  Where the minimum wage is concerned, this aphorism is doubly applicable.  Minimum wages reduce entry-level jobs, training, and lifetime income. Politicians regularly propose a minimum wage as a means of raising income and lifting workers out of poverty. However, improvements in some young workers’ income due to a minimum wage come at a cost to other employees.  For example, a young retail worker begins at minimum wage and works hard.  After 5-years, that employee has had a couple of pay raises that they worked hard to obtain.

Frank & Ernest - EmploymentNew FLSA revisions increase the minimum wage.  Now that hard-working employee is back to working for minimum wage because a politician wanted to incentivize other young workers to get a job.  But increasing the minimum wage cuts the hard-working employee’s hours; they now need a second job to make ends meet at the new minimum wage because they both lost their hard-earned raises and saw hours cut to afford new hires an opportunity.  Add in the inevitable rise in the cost of living to pay for higher wages, and this hard-working employee has been injured three times by their employer, due to government actions.

To make matters even worse, the fraudulent president tells that employee they should have learned to code and program computers.  The government injuries are sufficient to create an eternally challenged and debt-ridden poverty class in America.  Begging the question, what is just or fair about a minimum wage?

Editorial - Educational TruthThe other injury to that hard-working employee, entry-level jobs are going to dry up due to a higher minimum wage because technology will be implemented to replace that entry-level worker and eliminate their positions.  Look at the rise of contactless stores, walk-in, place items in your cart, walkthrough checkout, pay with your phone app, walk out.  Robots have been developed to replace kitchen workers making pizzas, flipping burgers, and stocking shelves.  More entry-level positions are dying because the cost of keeping an employee has become too expensive, which is especially true in the businesses and industries where profit margins are already slim, grocery stores, fast food, and warehouses, among others.

Minimum Wage Laws – State Government Injuries

Each state has the power to negotiate a higher minimum wage or meet the FLSA mandated minimum wage.  When America had a lot of entry-level jobs, workers would move to states with higher minimum wages.  The moving started a cycle that has now come back around to bite everyone involved in tender lower parts best left unbitten!  To pay for the higher wages, taxes increased, the cost of living adjusted upwards, and entry-level jobs began requiring skills, experience, education, etc., to match the higher salaries in the states paying more minimum wages.

Ziggy - IRS Non SequiturInflation became a problem, excess populations began to despair of making that higher wage and improving their upward financial mobility, and depression set in.  Instead of reducing the minimum wages, which would have lowered costs and incentivized hiring, the politicians increased the minimum wage, causing further injury to the government’s excess populations’ despair and disgust.  The government compounded their error by increasing welfare benefits and then put exclusions onto welfare benefits, and the problems in depressed populations only grew!

Now, that hard-working employee has three jobs, cannot afford to stop working any of them, cannot obtain welfare, and with the reduced hours cannot maintain their standard of living without a spouse also working three to four different jobs.  Leading to more chaos, less parenting, greater school influence, and the politicians keep compounding the injuries to the people voting them into office.  Is it any wonder why the American population is so angry, disgusted with Congress, and politicians rank lower than public toilets and used car salesmen in integrity and usefulness?Ziggy - The Government

What does a “Liberty FIRST Culture” look like?

  1. No minimum wage!  I know this sounds completely counter-productive, but please understand, the minimum wage law was 100% unconstitutional when it first passed!  The minimum wage is the source of inflationary price gouging and the source for a lot of social unrest, angry people, and wasted blighted neighborhoods in America.
  2. Return to the states their sovereignty where competing with other states is concerned. State sovereignty where wages are concerned will shift populations to where jobs are, incentivizing investments in local communities and local hiring.  There are jobs here in the United States, there are populations who want the work, but the disparity comes from people needing incentives to move, not moving the jobs to those population centers.  Cost value equations play a significant role in deciding where to put manufacturing facilities, warehouses, and other businesses.  State sovereignty is more important in this issue than many realize.
  3. Realize this truth; not everyone needs to go to college. There are thousands of jobs where skill and experience matter more than academic degree success.  The politicians are pushing education because the cost of a college education is where a lot of their power is derived from student loan debt.  Bernie Sanders promising free college should scare the pants off every American; look how bad K-12 is, and imagine all advanced schools in America operating in the same manner.

DutyAmerica, and every other country with a mandated minimum wage, please consider the damage done by higher prices, runaway inflation, and market conditions where unskilled people are paid wages employers cannot afford, forcing massive shifts to technology or simply closing their doors.  Skill attainment requires practice and time, learning, and working; as skills are developed, the market will pay a fairer share than any government mandate can demand.  Trust the system; capitalism works because it rewards people for working, learning, developing new skills, taking risks, and being active in their own futures.  Put Liberty FIRST and watch the world shift for the better.

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.