Now Comes The Mother Of All Debt Ceiling Crises, Part 1

The MAGA folks are going to be in for a rude awakening. That’s because Donald Trump has been taking to the public stage in recent weeks promising a new “golden age” of American prosperity upon his return to the Oval Office, but nearly the opposite is just around the corner. What’s actually coming down the pike is the UniParty’s revenge— a financial and economic shitshow that is likely to dwarf all that has gone before.

There is no mystery as to why. To wit, there is a demolition derby brewing in the bond pits that threatens to extinguish any even faint remaining hope that Washington’s Fiscal Doomsday Machine might be unplugged.

We are referring to the utter fiscal paralysis that stems from the combination of the GOP’s addiction to tax cuts and Big Defense budgets and the Dem’s demagoguery about Social Security, Medicare and the rest of the Welfare State. This means that down on the banks of the Potomac there is virtually no one left in the camp of fiscal rectitude. And, equally importantly, there is no political hay to be harvested by campaigning against the “borrow and spend” proclivities of an overweening central government, which has now become heavily insulated from the daily life of the people as they struggle to pay their bills and ward off the economic imprecations of inflation and taxes.

This embedded fiscal paralysis is actually something new under the sun, however. It was actually far different as recently as the late 1970s. Back then we found plenty of company among the GOP backbenchers in the US House as we launched full-throated political campaigns against the rising public debt and the “modest” rivers of red ink being incurred by “big spender” Jimmy Carter.

We employ the quote marks here because as it has turned out Carter’s biggest annual deficit in constant 2024 dollars of purchasing power was just $240 billion during the recession year of 1980. Given that the Federal deficit clocked in at $367 billion in the month of November 2024 alone, it can be well and truly said that the Washington UniParty is now capable of generating more red ink in 20 days than Jimmy Carter did during his worst year.

Of course, that outcome earned him in short order a one-way ticket back to Plains Georgia. Yet that electoral rebuke was no fluke nor was it even due to the superior campaigning style of the Hollywood B actor who displaced him. Back then the deficit had immediate ramifications on main street because the Fed was not yet monetizing the flow of Treasury paper. Accordingly, the Treasury Department’s sharp elbows in the bond pits caused interest rates to materially rise and private sector borrowers to be “crowded out”.

Needless to say, representing a typical “town and country” district in Michigan, as we did, our political support base was especially attuned to the effects of Uncle Sam sucking up the available supply of private savings. Among these supporters, for instance, were car dealers, whose floor plan financing costs got jacked-up by rising interest rates, and Savings and Loan executives, whose book of fixed rate mortgages got nailed by sharply higher funding costs. There were also farmers, who suffered ballooning financing costs for fuel, fertilizer, tractors etc. and small manufacturers, who needed to finance inventories and equipment—among countless other productive citizens immediately and adversely impacted by Federal deficits.