Dateline: May 4, 2021 — For the sixth consecutive week the Federal Reserve’s Treasury auctions failed miserably. In aggregate, the Federal Reserve planned on selling $150 billion worth of short and long-term securities. Each sale was progressively worse than its predecessor. By the sixth auction, a paltry one percent was bought by foreign governments or foreign central banks, and the primary dealers did not purchase anything. The Federal Reserve took down the ninety-nine percent of the final auction. Over the six week period the Federal Reserve purchased $145 billion worth of securities.
The Treasury Department responded in kind by printing another $500 billion of Federal Reserve Notes. Over the next four weeks nearly $300 billion worth of securities are scheduled for sale. Most likely, the Federal Reserve would be buying that debt outright as well. The political class’s vapid desire for spending had escalated under President Tucker. Deficit spending under the prior administration exceeded one trillion dollars every year. In fact, the annual deficit never dropped below $1 trillion per year from 2009 through 2020. The national debt stood at $25 trillion and spending on the vaunted entitlement programs now exceeded $4 trillion annually. President Tucker campaigned on the promise; No more debt! No more deficit spending! In other words, pretty much the same rhetoric as every presidential candidate over the past forty years.
Naturally, governing and campaigning are two different animals. The political class cajoles, lies, deceives, evades, and manipulates during the campaign season. Some pundits say, “it is the reason for the season”. President Tucker used the American people like pawns in chess. Tucker played on their fears. Tucker pulled on their heart strings. Tucker was the quintessential politician. Tucker had all the Ivy League credentials, grew up in a political family with all the right connections, and when he entered the room everyone naturally gravitated towards him. His political opponents said of Tucker, “he’s so smooth and well versed he could sell you sand on a beach”. So much for real change!
After Tucker swore an oath to uphold the Constitution of the United States he reneged on his campaign promises. Two months after being sworn into office, President Tucker submitted his first budget to Congress. Instead of cutting spending and balancing the budget, Tucker increased spending by twenty percent. Tucker’s first budget called for $7 trillion in spending. Social Security and Medicare alone totaled $4.1 trillion. Then there was another $1 trillion for the Affordable Care Act. The remaining $1.9 trillion was spent on defense ($1.1 trillion) and $800 billion on everything else.
The projected revenues in Tucker’s budget totaled $3.5 trillion; meaning Tucker had to borrow $3.5 trillion to fund government. That means the government planned to borrow 50 cents of every dollar spent.
The economic tides had ebbed when they needed to flow. Unemployment had risen steadily the past ten years from 7.8% in 2009 up to 18.3% in 2020. Undoubtedly, the real unemployment rate was higher. Much higher! Over the past two decades the Bureau of Labor and Statistics manipulated the unemployment data. Not only had the calculations changed, but “manual” adjustments – referred to as seasonal adjustments – skewed the numbers lower. In fact, the BLS unemployment figures were no longer economic indicators. Instead they were politically motivated numbers to be used by the current President, or his challenger, for political gain.
The truth is more people were unemployed in 2020 than in the history of the United States. The unofficial unemployment rate was 23.9%. The traditional labor participation rate hovered around 66% until the early 2010s. Then it began to drop to 64% by 2012 and to 62% by 2016. By 2020 the labor participation rate was an abysmal 59.8%. The unemployment rate of those in the 18-24 age group was 35%. The unemployment rates for blacks just breached 40% a month before Tucker was sworn into office. Forty-two million Americans were out of work. Thirty-five million were on the Supplemental Nutritional Assistance Program (SNAP), colloquially referred to as food stamps. Fourteen million people received some form of disability payments.
Tucker justified his reckless budget to the American people like any seasoned politician. He lied. Tucker said it was for the middle class. Tucker said he was investing in our children’s education. Tucker said there were vital national security interests throughout the world. The same rhetoric spewed out of the mouths of politicians on the left and the right; the conservatives and the liberals. There’s always some justification for government to confiscate the rightful property of those that labored to earn it. At least that was the blatant effort.
The more invisible effort happened as a result of years of destructive monetary and fiscal policy. Over the past ten years the purchasing power of the dollar dropped by 50%. In other words, prices had doubled in the past ten years. Meanwhile, more people were unemployed and on some form of government assistance. While those that were employed did not see their wages keep up with the real inflation rate. Once again, another government alphabet soup agency was putting out the Consumer Price index(CPI). According to the government, inflation had been steady the past 20 years. In fact, the government says the CPI was between .5% and 3.5% over the past 20 years – averaging only 2 percent per year. Once again, we learn that the CPI calculations were adjusted starting in the early 80s with a major change in the early 90s. Using the CPI calculations from 1980 the real inflation rate the past 20 years has been 5% on the low end and 12% on the high end. For prices to double over the past 10 years, the inflation rate was just over 7% annually.
Inflation is the invisible tax. The tax we all pay regardless of your income level or what’s on your IRS from 1040 every year. The purchasing power of a Federal Reserve Note (a.k.a. the dollar) has dropped by 50% the past 10 years and by 70% since the year 2000. A gallon of gas cost $3.60 in 2012 costs $6.75 per gallon in 2021. A vehicle holding 15 gallons of gas cost $108 to fill up. Food costs have doubled. Milk is $5.99 per gallon. A loaf of bread cost $5.50. A 5 ounce can of tuna costs $4.75. Ground beef costs $12 per pound.
In 2021, only 46% of the people pay federal income taxes. The other 54% pay no federal income tax. New taxes were enacted over the past ten years. In addition to all of the new taxes in the Affordable Care Act, a national value added tax (VAT) of 12% was enacted. Corporate taxes were increased to 42%. The highest tax bracket for individuals was increased from 36% in 2012 to 48% by 2021. Most states and localities increased property tax rates as well to compensate for their profligate spending and lack of revenues. Home prices were 30% lower than the financial crisis of 2008.
Time magazine declared the year 2021 to be the year the middle class officially died. What remained were the haves and the have nots. Those privileged few in society or with the right political connections to ensure a reasonably good life style. For the rest, it was a daily struggle to provide the basic necessities in life. For many, the daily struggle was to lick the hand of the government official that tossed a few crumbs their way. A couple hundred dollars on an EBT card was barely enough to feed a family for a few days. The poorest in society were restless. Others were simply frightened. All the talk about how this couldn’t happen here was coming true. The country was in decline and, by all reasonable thinking people, rapidly deteriorating. The U.S.A. was Rome. The bread and circuses were no longer keeping the masses fed and entertained. The ruling class was concerned by this development. How long before it burned, was the unspoken question.
Yet, the people clamored for government to do more. Help us. Feed us. Where is my Social Security check? Where is my EBT card? Go take it from the rich and give it to us. Our children are starving. Medical care was barely available. When you could get medical care it took months to get an appointment or you’d spend half a day or more waiting for care in the emergency room.
Remember back in 2012 when the Supreme Court ruled in favor of the Affordable Care Act. Well, a couple of comments on that. First, it’s no longer affordable for nearly 90% of Americans. Second, it’s nearly impossible to get any medical attention. Third, those in the medical profession only act like they care. The medical profession is reimbursed by the government. And, the government payments have been reduced, are paid late, or don’t show up at all. Over the past ten years, nearly one-third of all doctors and nurses has left the profession or went to another country to practice medicine. Very few doctors come out of medical school. In fact, nearly half the medical schools in the country have shut down.
Indeed, President Tucker intended to do something. He was going to spend, borrow, and print. The country wasn’t going to collapse on his watch. Tucker will keep things held together with chicken wire and string. Tucker didn’t want historians writing about how the United States – the greatest country on the face of the earth – collapsed while John J. Tucker was the commander-in-chief. “Not going to happen”, Tucker told his advisors. We will spend, borrow, and print. We’ll let the next administration fight this problem.
During all this the people continued to believe the “next” administration was going to fix the problems. The next set of elected Representatives and Senators would finally do something about the problems. The next President –you know the one that promised to end the deficit spending and not add to the debt — has invested in lots of paper and ink. He’s confident the printing presses will be the answer.
As for the people, they continue to believe the answer lies in the next election. They believe change will come, only to be disappointed once again. They continue to defend the lies. They continue to defend their political party. The people continue to blame others in society for their woes. Meanwhile the drumbeat of the status quo rolls on in Washington, D.C.
While the people search for crumbs the country is crumbling around them.