Horowitz: Who will stop the real government shutdown?

Unlike the COVID lockdowns of 2020, average Americans will not feel any impact from a temporary loss of federal funding. Yet our lives are completely distorted by it existing Government closures today. You may not recognize them as “shutdowns.” Really it’s just that the government is printing so much money and burdening us with so much debt that the standard of living of two generations ago has become a luxury.

Who will end? The switch off?

Senate Minority Leader Mitch McConnell (R-Ky.) says we could just have a “default“Continue the solution (other than additional funding for Obamacare and Ukraine, of course), and we will avoid a shutdown.” What he didn’t explain, however, is how our society will endure another year of a $2 trillion deficit – $1 trillion of which is in interest alone – can survive what is driving up the cost of living to such an extent that virtually everyone is suffering from lifestyle stagnation. If not in the budget, where else could we have this debate and fix the problem?

If we were to follow the McConnell status quo path, it would be to face an inescapable death trap between endless debt and interest rates that continually increase inflation and interest rates that continually drive each other up, driving each other up would further exacerbate the ultimate fiscal death spiral.

For the first time in history we are now faced with all of this Disadvantages from high interest rates without any Advantages. The last time interest rates were this high, government deficits were a fraction of their current levels. Nowhere is this more evident than in housing construction.

The total value of the US real estate market is 49% higher than before the COVID fundraiser. Everyone thought rising interest rates would at least lower prices, but instead they created a mortgage gap between existing owners and buyers, so no one wanted to sell their low mortgage home for a home with a much higher interest rate.

For this reason Home sales are down more than 18% this year so far.

Mortgage rates haven’t been this high since 2000. But back then we had budget surpluses and not constantly gigantic deficits. Inflation was not a problem. We also were unable to overcome the record low interest rates arbitrarily designed to finance the COVID lockdowns, which in turn led to a steep rise in mortgage rates the likes of which we had never seen before.

What 20- or 30-year-old head of a family could afford to buy a first home? The average sales price for a home in the United States today is $514,000. Barring a down payment of more than $100,000, monthly payments would exceed $2,875 per month at 7.5% interest.

Additionally, rising prices are driving up taxes and insurance, which could easily add another $500 to $600 per month to a middle-class homeowner’s significant expenses. This means that for a family of four earning about $100,000 per year, almost $3,500 of the $5,900 net monthly income would have to go toward housing.

This represents 59% of income, about double the 28% standard set by the mortgage industry for household solvency. Obviously this is not sustainable. You would need an income of more than $235,000 per year to stay below the 28% share of housing costs. For most people, this would likely only be the case in higher cost areas where homes are even more expensive. And that’s all before we give an account of it an additional $709 in monthly living expenses.

None of this will go away, and it will only get worse as more debt comes due at higher interest rates. Treasury yields have risen almost daily over the past two weeks, although no further interest rate hikes are expected in the coming weeks. Appearances can be deceiving.

The trap between endless debt-fueled inflation and rising interest rates is like a runaway train racing down a hill. Unlike previous periods of dramatic spending increases, almost all new spending due to COVID has been funded by debt, not taxes. As former White House budget policy director Paul Winfree observedOnly between 4% and 7% of spending increases since COVID have been funded with tax revenue. During World War II, this number was 30%. This means that almost all new spending will be paid for in the form of money creation, i.e. inflation, and expiring government bonds at higher interest rates.

In the two weeks alone since gross federal debt topped $33 trillion, we have added another $12 billion every day, for an annual pace of $4.4 trillion in additional debt ! In less than three months since the “biggest spending cuts in American history,” we have added $1.7 trillion in debt, the fastest time in history other than the Cares Act. Therefore, government bond yields will skyrocket in line with debt issuance. That means the American dream is dead—not just for our children and grandchildren, but for us too Today.

In other words: We are experiencing the largest shutdown of a society, economy and civilization imaginable. What is the reopening plan?

No fear! Fearless leader Mitch McConnell believes any fiscal austerity “would actually take away progress We’ve taken our cue from key issues and are dragging it backwards.” What you call an economic collapse, McConnell is hailing as progress — as long as those venerable HUD and Department of Education employees don’t miss a few weeks of back-paid vacation with cost-of-living adjustments you’ll never see .

Laura Coffey

Laura Coffey is a Worldtimetodays U.S. News Reporter based in Canada. His focus is on U.S. politics and the environment. He has covered climate change extensively, as well as healthcare and crime. Laura Coffey joined Worldtimetodays in 2023 from the Daily Express and previously worked for Chemist and Druggist and the Jewish Chronicle. He is a graduate of Cambridge University. Languages: English. You can get in touch with me by emailing: LauraCoffey@worldtimetodays.com.

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