WASHINGTON (October 17, 2023) Majority Leader of the US Senate, Chuck Schumer, speaks at the Conference of Presidents of Major American Jewish Organizations Gathering at a Historic Synagogue, Sixth & I, in Washington, DC. (DHS photo by Tia Dufour)
At the Ron Paul Institute for Peace and Prosperity, former congressman and presidential candidate, Dr. Ron Paul wonders why, despite skyrocketing national debt, Congress is so unserious about cutting spending on welfare and warfare. He writes:
According to new reports from the Social Security and Medicare trustees, Social Security and a Medicare fund that pays for hospital expenses will both begin running deficits in 2035 and 2036. Disappointingly, but not surprisingly, Congress was too preoccupied spending billions more on military aid for foreign countries and banning TikTok to pay attention to the looming bankruptcy of the two largest federal entitlement programs.
Many in Congress no doubt believe they can ignore the impending bankruptcy of Social Security and Medicare because they can count on the Federal Reserve to do the “dirty work” of cutting real benefits and raising taxes. This result can be produced via the hidden, and regressive, “inflation tax.”
The Federal Reserve makes the debt-financed welfare-warfare state possible by monetizing the federal debt. This is one reason why, even though interest on the debt is now the third largest item in the federal budget behind Social Security and Medicare and ahead of military spending, there are so few in Congress serious about cutting welfare or warfare. Those few who seek real spending cuts in welfare are smeared as “heartless” while those seeking real cuts in warfare are smeared as “anti-American” by the uniparty.
The government’s excessive spending and debt is leading to what some economists call “fiscal dominance.” Fiscal dominance occurs when a central bank must prioritize monetizing ever higher levels of government debt, giving Congress de facto control over monetary policy.
The Federal Reserve’s purchase of federal debt will result in price inflation. It will also encourage more government spending by reinforcing the uniparty delusion that, as former Vice President Dick Cheney said, “deficits don’t matter.” The Federal Reserve’s inflationary policies artificially lower the interest rates, which are the price of money. The artificially low interest rates distort the signals sent to investors and entrepreneurs, leading to malinvestment. This creates bubbles resulting in illusionary prosperity. Eventually, economic reality will catch up with the Fed-created illusions and the bubbles will burst, causing an economic downturn.
Read more here.
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