The race for the Democrat nomination is getting lively, and candidates are falling over themselves to make big-ticket spending pledges. Whether it’s socialized health care costing trillions, or a revamped “Green New Deal” costing trillions more, no program is too expensive for the left-wing presidential wannabes. There’s only one problem: The Federal Reserve says we can’t afford any of it.
Every reasonable adult knows that you can’t keep on spending more than you earn. Unfortunately, there don’t seem to be many adults in the Democratic Party. Several candidates are staking their campaigns on big-budget entitlement programs or insanely expensive environmental goals.
- Federal Reserve Chair Jerome Powell spoke to the Joint Economic Committee on Wednesday, and he had some tough words of warning about the nation’s finances.
- Powell explained that the federal debt is now more than $23 trillion, and is rising at an accelerating rate. In his words, it’s on an “unsustainable path.”
- While high debt is a problem in its own right, Powell’s main concern is that if there’s another economic downturn the debt situation will mean the government can’t do much to turn the economy around.
- When the economy is weak, the government can kick-start it by placing contracts and financing projects — spending money, basically. But it has to get that money from somewhere and there are only two sources: tax or borrowing. Increasing taxes during a downturn is a bad idea because it slows down everyone else’s spending.
- That only leaves borrowing — and with the debt already at $23 trillion, that’s also a bad idea.
- President Trump is trying to balance the books, both by stimulating the economy to raise more revenue without raising taxes and reining in the growth of federal entitlement spending. Even then the government spent more than it raised last month — by $134 billion.
- People like Bernie Sanders and Elizabeth Warren won’t even try to budget sensibly. Lunatic schemes like Medicare for All and the Green New Deal will cost trillions, and the Dems have no idea how to pay for it all.
- Some Democrats think they can raise the money by increasing taxes, but the reality is that taxes in the US are already above the optimum level — especially corporate taxes, which are some of the highest in the world. Higher tax rates mean slower economic growth which means less tax actually collected.
- So the only way to pay for the spending Dems promise is by more borrowing — and we already have more debt than we can afford. This is something the American people have to take into account when they vote, or our debt crisis will become a catastrophe.
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