Friday, November 6, 2020

We Can Already Hear the Cries of “Sell-Out” and “Betrayal” Coming From the Progressive-Left Over Sleepy Joe or Kamala Actions

By David Stockman

James Madison is surely smiling from his grave.  

Pursuant to his constitutional design, last night a badly divided electorate got an utterly  gridlocked government—with the Supreme Court and Senate in the hands of one party  and the House of Representatives and White House marginally in the hands of the  other. That’s as good an RX against tyranny as it gets.  

Vlad Putin is probably smiling, too. His economy is being battered by Washington’s  bully-boy sanctions because he has been falsely accused of throwing the election to  Trump in 2016. This time, even by the lights of the Dem and Deep State Russophobes,  however, Putin appears to have been AWOL.  

Yet the natural Blue Wave that was allegedly aborted in 2016 by Putin’s hackers and  social media trolls didn’t happen. What we got, instead, is Sleepy Joe (apparently)  stumbling into the Oval Office with just one electoral college vote to spare (270-268).  That is, the real people of Flyover America, not the Kremlin’s trolls, again voted for the  Donald and came up but a whisker short.  

Ordinarily, conservatives should be smiling most of all. Donald Trump is no friend of  liberty, small government or fiscal and monetary rectitude, and he’s now (almost) gone.  Good riddance!  

More broadly, large, fully mobilized governmental majorities are the handmaids of  Leviathan. Always and everywhere the expansion of state power gets abused by  ambitious politicians and government apparatchiks for the benefit of the few at the  expense of the many. So paralyzed government is just the thing to safeguard personal  liberty and private prosperity.  

Nor are we talking just, or even mainly, about the threat of old-fashioned mailed fists  and boot-heel tyranny where citizens are rounded up and jailed. Today’s Leviathan  presents more often than not as the Nanny State, wielding a velvet glove of regulation,  taxation and fiscal subvention in the name of the public welfare and protection of  citizens from themselves.  

But the result is tyranny just the same. The War on Drugs is a 50-year old example,  while the swift, shocking and economically catastrophic imposition of economic martial  law last spring to eradicate a super-flu is but the latest. Yet now this eight-month old  excrescence of Nanny State oppression threatens constitutional government and  capitalist prosperity like rarely before. 

So the fact that the Dem majority in the US House has been cut from 35 votes to less  than 20 and the Senate will likely remain 52-48 Republican is in many respects all to the  good.  

For one thing, all the hobgoblins that have terrified Mark Levin and Sean Hannity— Supreme Court packing, elimination of the Senate filibuster rule, sacking the Electoral  College, making Washington DC and Puerto Rico (Dem) states, prohibition of fracking  and outlawing of fossil fuels, Medicare-for-all, legalization of millions of new immigrant  (Dem) voters—are now absolute dead letters.  

Even better, Sleepy Joe may well abdicate to a Kamala Harris Regency, but it will be one  shorn of the Progressive/Left part of the equation. That’s because on substantive  legislation it will take 60 votes to break a Senate GOP filibuster, but it will be a rare day  inside the beltway when 100% of the Senate Dems including Manchin (WV) and Tester  (MT) and 11 Republicans are corralled in favor of the kind of Bernie/AOC stuff that got  stuffed into the Dem platform.  

To the contrary, we can already hear the cries of “sell-out” and “betrayal” coming from  the Progressive-Left whenever Sleepy Joe or Kamala, as the case may prove to be, send  their equivalent of Stevie Mnuchin, knee pads in hand, up to Capitol Hill to pleasure  with compromises Senate Leader Mitch McConnell, who is now secure in another six  year term and a guaranteed 60-years on the public teat.  

Indeed, we suspect the Washington Republicans—as undeserving and feckless as they  have been for years—may end up with the best of all worlds. That is, being handed a  cornucopia of attackable red meat for the 2022 mid-terms owing to the tabling of leftist  agenda measures by a Biden Administration chok-a-block with progressives and  woksters, even as they would have odds-on capacity to block Senate passage or even  serious consideration.  

So far, but, finally, not so good.  

Alas, the one great flaw in James Madison’s design for a democracy hobbled with checks  and balances is the case where the horse manages to get out the barn door, anyway.  Then you need strong majorities on both sides of Capitol Hill aligned with White House  policies in order to enact positive measures to put the horse back in its stable.  

We are referring, of course, to the calamitous fiscal estate that has resulted from 40- years of deficits-don’t-matter drift and 4-years of the Trumpian fiscal bacchanalia. The  whole thing is now one giant Doomsday Machine driven by trillions per year of  automatic entitlements, a rapidly swelling retirement-based Welfare State and a deeply  embedded military-industrial-surveillance complex and its counter-part domestic pork  barrels.  

That all was bad enough, but the Lockdown Nation economic calamity and the Coast-to Coast soup lines that have been enacted by the bipartisan duopoly to indemnify 150 

million households and millions of businesses, almost certainly guarantee that the fiscal  equation will now go tilt.  

That is, a perpetually weak debt-entombed economy and the resulting depleted  government revenues (including state and local government, which are the one thing  Biden will get funded in the coming Everything Bailouts) will result in double-digit  Federal deficits as far as the eye can see, as we will quantify on another occasion.  

Needless to say, our newly-elected gridlocked government is not about to do anything to  ameliorate this embedded fiscal calamity. You can be sure that the GOP Senate won’t  enact any material Biden tax increases; and by the same token, a Biden Administration  already failing to make progress on the Progressive-Left agenda won’t be embracing  social security, medicare and other entitlement reforms. And, of course, the merchants  of war own the Congress regardless of party, election results or actual national security  needs.  

But here’s the thing. Under any circumstance, these now guaranteed double-digit  annual deficits (i.e. $2 trillion plus at current GDP levels) aren’t sustainable because  compounding interest expense eventually sends the ship-of-state into the fiscal drink.  

In fact, in an economy that has been systematically and brutally stripped of private  savings for decades by central bank financial repression, the only was to finance  persistent double digit fiscal deficits and keep interest rates from lurching upward is via  100% monetization of new debt issues.  

Undoubtedly, Wall Street’s talking heads might initially find that prospect untroubling,  and perhaps even indulge in more insanity like today’s 367 Dow point rise on the  apparent theory that the great 2020 election uncertainty is coming to a imminent end,  and that a nice, pro-stimulus 47-year Swamp Creature will be shuffling into the Oval  Office.  

Yes, the uncertainty about the name of the next president is ending soon, even as the  Donald’s desperate effort to reverse his loss in Michigan, Wisconsin and elsewhere  comes a cropper in a Supreme Court of his own making.  

At the same time, a far more consequential uncertainty is just beginning. No known laws  of economics or experiences of history permit 100% of massive public debts to be  monetized indefinitely at the central bank’s printing press.  

It is only a matter of time until the Fed prodigious money-printing blows the nation’s  egregiously inflated and speculation-ridden financial markets sky high.  

That’s the real end game of the gridlock that emerged from Tuesday’s voting. And it’s  most definitely not the good kind imagined by the wise men who wrote the nation’s  constitution.  

David Stockman was 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.

The above originally appeared at David Stockman's Contra Corner.

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