Liquidity Problems Are Closer Than You Think

ZeroHedge, Mar 06 – Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Excerpts:

In 2019, the Fed cut interest rates and restarted QE despite a healthy economy. Today, inflation is higher than the Fed’s target, economic growth is above historical trends, and financial markets display complacency and exuberance. Yet, the Fed is talking about cutting rates and reducing QT. The only rationale for them in such an environment must be a concern with potential liquidity problems, as the declining balances in the Fed’s Reverse Repurchase Program (RRP) suggest.

…Total debt is growing much faster than the economy’s collective income. To facilitate such a divergence and try to avoid liquidity problems, the Fed has increasingly employed lower interest rates and balance sheet machinations (QE). Numerous bank and investor bailouts have also helped.

 As the country becomes more leveraged, the Fed’s importance will increase.

What is the RRP? – A repurchase agreement, better known as a repo, is a loan collateralized by a security. The Fed’s RRP is a loan in which the Fed borrows money from primary dealers, banks, money market funds, and government-sponsored enterprises. The term of the loan is one day.

The program provides money market investors with a place to invest overnight funds….

Think of RRP as money market supply offered to help balance the supply-demand curve for overnight funds.

During the pandemic, the Fed bought about $5 trillion of Treasury and mortgage bonds from Wall Street. As a result, a massive amount of liquidity was injected into the financial system. Since banks did not use all the liquidity to make loans or buy longer-term assets, financial institutions had excess liquidity that needed to be invested in the money markets. The result was downward pressure on short-term yields.

The Fed raised its Fed Funds overnight rate to help combat inflation. But, with the excess funds sloshing around the market, hitting their target rate would prove difficult. RRP allowed the Fed to meet its target.

The Current Status Of RRP – At its peak, the RRP facility reached $2.5 trillion. Since then, it has decreased steadily. Currently, it is half a trillion dollars and will likely fall to near zero in the coming months. Essentially, the market is absorbing excess liquidity. Over the last year, excess liquidity has been needed by the Treasury to fund its swiftly growing debt and to help the market absorb the bonds coming off the Fed’s balance sheet via QT.

Excess Liquidity Is Vanishing – It’s difficult to experience liquidity problems when liquidity is abundant. The extreme actions of the Fed in 2020 and 2021 made it much easier for the banking system, financial markets, and economy to handle much higher interest rates and $95 billion a month of QT.

However, excess liquidity is diminishing rapidly.

So, what type of problems occur when the excess liquidity is gone? For starters, banks will still have to use their reserves to help the Treasury issue debt and absorb the Fed’s balance sheet decline. Such actions will force liquidity to migrate from other parts of the financial system to the Fed and Treasury. Without RRP to draw funds from, banks will have to tighten lending standards for consumer and corporate loans. Further, they may likely pull back on margin debt offered to speculative investors.

The cost of higher interest rates and QT will likely be felt at this point.

Revisiting 2019 – In 2019, Treasury-backed repo interest rates between banks and other investors were trading well above uncollateralized Fed Funds. Such a circumstance didn’t make sense.

As a hypothetical example, JP Morgan was lending Bank of America money overnight at 5.50% with no security (collateral) despite a hedge fund willing to borrow at 5.75% fully secured with Treasury bonds. Yes, Bank of America has a better credit rating and lower default risk, but the hedge fund is pledging risk-free collateral. While small, the odds of JP Morgan losing money in this example are greater for the Bank of America loan than the hedge fund repo trade.

At the time, the Fed was raising rates and reducing their balance sheet for the prior year and a half. Liquidity was becoming a big problem. There was no RRP to draw liquidity from to offset QT. Simply, liquidity was lacking.

To combat the liquidity shortage, the Fed added liquidity by reducing the Fed Funds rate and re-engaging in QE. It’s important to remind you that they took these actions while the economy was in good shape and broader financial markets showed little to worry about.

The graph below highlights when the Fed quickly reversed course.

2019 is very relevant because similar problems may arise as the excess liquidity from the pandemic finally exits the system.

The Fed Is Prepping For Liquidity Problems – The Fed appears to be aware of potential liquidity shortfalls. Over the last month, they have started discussing reducing their monthly amounts of QT. A formal announcement could come as early as the March 20th FOMC meeting.

Such discussions and planning occur even though inflation is still above target, the economy is growing faster than the trend, and the stock market is near record highs. Under those circumstances, one would think the Fed would maintain its tight monetary policy.

The Fed is aware that large institutional investors have to sell assets to reduce leverage if there isn’t sufficient liquidity. Such collective actions could significantly weigh on financial asset prices and, ultimately, the economy.

To wit, consider a recent article by the New York Fed. In The Financial Stability Outlook, author Anna Kovner states the following: “Achieving a strong U.S. economy and stable prices is paramount, and remaining aware of the impact of policy choices on the financial system is a key ingredient to maintaining the ability to execute policy. To close with the snow metaphor I began with, if there is a blizzard in March, we will be prepared to dig out quickly, plow the streets, and get back to work.“

March is not just a random date. March is when the RRP program is expected to fall to near zero!

Will The Fed Know When Liquidity Is No Longer “Ample”?

No magic number or calculation tells the Fed when excess liquidity is gone. Furthermore, they will only know when liquidity becomes insufficient after the money markets have reacted negatively.

Dallas Fed President Lorie Logan recently made that clear. Per a speech she gave on March 1, 2024: “The challenge today is knowing how far to go in normalizing the balance sheet. In 2019, the FOMC decided that it would operate in the long run with a version of the floor system where reserves are “ample.” The word “ample” suggests comfortably but efficiently meeting banks’ demand. As I’ve argued elsewhere, the Friedman rule provides a guide to the efficient supply of reserves in the ample-reserves regime. Banks’ opportunity cost of holding reserves should be approximately equal to the central bank’s cost of supplying reserves.“

Further, she notes: “So, I don’t think we can identify the ample level in advance. We’ll need to feel our way to it by observing money market spreads and volatility.“

Summary – Excessive amounts of debt support our economy and asset valuations. Therefore, the Fed has no choice but to keep the liquidity pumps flowing to support the leverage.

As in 2019, the Fed will likely take stimulative policy actions to provide liquidity despite an economic and inflation environment where policy should remain tight. 

Keep a close eye on the excess liquidity gauge RRP and be aware of irregular activity in the money markets.

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The Leviticus 25 Plan provides an powerful new channel that retargets liquidity flows to effectively solve America’s looming liquidity crisis – and restore economic liberty for millions of American families.

The Plan will: 1) Eliminate massive amounts of public and private debt; 2) Support corporate credit markets; 3) Restore order in Treasury auctions / reduce interest rates; 4) Set America back on course for long-term economic strength and stability.

“He who will not apply new remedies must expect new evils.” – Sir Francis Bacon

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11946 downloads )

Congress is once again spinning its budget wheels, America is sinking ever deeper into its self-made cavernous debt hole, and the economy continues on in a sour skid.

It is time to think outside-the-box. It is time for a comprehensive new strategy….

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Congressional Leaders Announce Deal To Avert Shutdown

ZeroHedge, Feb 29, 2024 – Update (1748ET): Congressional leaders have reached an agreement to avert a government shutdown this week. Under the deal, six full bills will be extended which will cover the departments of Agriculture, Justice, Commerce, Energy, Interior, Transportation and Housing and Urban Development through March 8, while the remaining six annual funding bills covering the departments of Labor and Health and Human Services, the Pentagon and other offices will be covered through March 22.

So, more can-kicking.

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SuperCore Inflation Soars In January, Services Costs Re-Accelerate As Govt Handouts Spike

ZeroHedge, Feb 29, 2024 – …biggest MoM rise in Services inflation ex-shelter since Dec 2021

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Pending Home Sales Puked In January, Back Near Record Lows

ZeroHedge, Feb 29, 2024 – ...and December’s ‘surprise’ surge was revised down large. 

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Survey-Based Sentiment Slump Continues As Prices Paid Accelerates in Plunging Chicago PMI

ZeroHedge, Feb 29, 2024 – …not exactly election-winning headlines.

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Imagine a dynamic economic plan that grants U.S. citizens the same direct credit extensions that the Fed provided the Wall Street financial markets during the credit crisis of 2008-2010 and again in COVID downturn of 2021-2022.

Imagine millions of American families paying off trillions of dollars in mortgage debt, consumer debt, auto loans, student loan debt – and banks being suddenly ‘reliquified.’

And then imagine the U.S. banking sector looking for a place to earn a return as they wait patiently for loan demand (from now credit-worthy borrowers) to rebuild… over time.

Finally, imagine banks bidding on the highest form of AAA rated paper in the credit markets, U.S. Treasury bills and bonds and high-grade paper in the corporate bond market…

And then watch interest rates come back down. Watch the economy shift back into a long-term growth cycle, American families regain financial security, strength under-girds the U.S. Dollar.

Imagine an economic plan that generates $112.6 billion budget surpluses 2025-2029, and pays for itself entirely over a 10-15 year period.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11788 downloads )

Question: Do Washington Democrats and Republicans have a plan to turn this looming economic shipwreck around…?

Does the Fed have a plan, or the U.S. Dept of Treasury…?

Answer: No, No, and No.

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US GDP “Grew” $334 Billion In Q4…. That Growth Cost $834 Billion In Debt

ZeroHedge, Feb 28, 2024 – Excerpts:

…First, according to the Biden admin, in Q4 GDP rose 3.2%, a modest drop from the 3.3% reported in the first estimate one month ago, and below the 3.3% consensus estimate.

While we already know this, the BEA reported that the increase in the fourth quarter primarily reflected increases in consumer spending, exports, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

• The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were health care, food services and accommodations, and other services (led by international travel). Within goods, the leading contributors to the increase were other nondurable goods (led by pharmaceutical products) as well as recreational goods and vehicles.
• The increase in exports reflected increases in both goods (led by petroleum) and services (led by financial services).
• The increase in state and local government spending reflected increases in both investment (led by structures) and consumption expenditures (led by compensation of employees).

But what does that have to do with the bitcoin spike?

Well, a closer look at the data revealed something stunning: a quick look at the increase in nominal GDP, which rose from $27.61 trillion in Q3 to $27.94 trillion in Q4, shows that the US economy increased some $334.5 billion in absolute nominal dollar terms.

But where did this growth come from? Why debt of course, and a lot of it. For the answer how much debt, we go to the US Treasury’s Debt to the penny website, where we find that debt on Sept 30, 2023 was $33,167,334,044,723.16 and debt on Dec 31, 2023 was $34,001,493,655,565.48.

In other words, it cost $834.2 billion in debt during Q3 to grow the US economy by $334.5 billion, or exactly $2.5 in debt for every $1 in GDP “growth.” Source: BEA and US Treasury

Which also brings us back full circle and explains why bitcoin is now trading at $60,000, the highest price since late 2021 and why it will not only surpass its all time high in just a few days, but why it will rise much, much higher, because the US is now well past the point of no return.

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Main Street America Republicans do have a plan – with the power and reach to bring the U.S. back “from the point of no return” – to being once again the world’s premier free market economic powerhouse.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11782 downloads )

Washington Republicans appear to be losing ground in America’s ‘election integrity’ battles, while at the same time offering ‘nothing’ to restore prosperity, reignite economic growth, maintain confidence in the American Dream – to win back the hearts, and votes, of U.S. citizens.

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GOP Efforts To Shore Up Election Security In Swing States Face Challenges

ZeroHedge, Feb 19, 2024  |  Authored by Steven Kovac via The Epoch Times

Excerpts: 

Massive voter fraud allegations that marred the 2020 election spurred a political and grassroots movement from coast to coast to pursue an array of election reforms designed to increase election integrity.

However, with just months left ahead of the 2024 election, Republicans say little was mended, especially in contested states where they thought fixes were needed most.

Much concern is centered around five key swing states that became the focus of 2020: Georgia, Pennsylvania, Arizona, Michigan, and Wisconsin.

Election reforms tend to follow party lines. Democrats commonly castigate increased election security measures as voter suppression, while Republicans often condemn laws and directives that loosen security as aiding and abetting voter fraud.

According to a report from the Brennan Center for Justice, a left leaning, non-profit, law and research foundation, 23 states enacted 53 laws relaxing election security restrictions in 2023, while 14 states enacted 17 laws tightening them.

The statistics suggest that Democrats are still winning the nationwide battle, as they have for the past several years. The report found the states that took the most actions to tighten election security are the places that already had security measures in place.

Of the 14 states that tightened voting procedures, President Trump won all but one (New Mexico) in both 2016 and 2020. The 14 states listed by the Brennan Center include Arkansas, Florida, Idaho, Indiana, Kansas, Mississippi, North Carolina, North Dakota, Nebraska, New Mexico, South Dakota, Texas, Utah, and Wyoming.

The methods by which Americans cast their ballots have changed markedly over the last four federal election cycles, with many people embracing election procedures such as no-excuse absentee voting, early voting, and same-day voter registration.

As early as 2005, the bipartisan Carter-Baker Commission raised concerns that mail-in voting was a vehicle for potentially significant election fraud, yet the method has since steadily grown.…

In the 2022 election, half the states and territories allowed same-day voter registration.

In the election cycles before the pandemic, the EAC study said that nearly 60 percent of Americans voted in person on election day. In 2022, the figure was 49 percent.

Before the pandemic, mail-in ballot drop boxes were rare, with most being deployed in or around an election office. By 2022, there were 13,000 drop boxes being used in 39 states, with many boxes placed in settings that lacked security and surveillance measures.

Fifteen of the 39 states and territories using drop boxes, including Georgia, Michigan, Pennsylvania, Wisconsin, New York, and Maine, couldn’t report how many ballots were collected from their receptacles in 2022, the report said….

Despite the push by some election integrity activists for the hand-counting of ballots as a means to improve accuracy and security, the method was used by only 17.8 percent of jurisdictions in 2022, down from 20.7 percent in 2020.

And although chain of custody protections for ballots are being tightened in several states, dirty voter registration rolls—resulting in mail-in ballots being sent to ineligible people, undeliverable addresses, or multiple ballots being sent to the same individual—are still a widespread issue….

Georgia – The state of Georgia has been the scene of continuous controversy over the conduct of the Nov. 3, 2020, presidential election in which challenger Mr. Biden defeated incumbent President Trump by 11,779 votes (0.23 percent).

The persistent public outcry over alleged election fraud prompted the Republican-controlled Georgia General Assembly to pass the 95-page Georgia Election Integrity Act of 2021.

The declared purpose of the legislation is to apply “the lessons learned” in 2020 and “make it easy to vote and hard to cheat,” in the future.

An explanatory notation in the bill acknowledged that there was a “significant lack of confidence” in the state’s election systems stemming from persistent allegations of “rampant voter fraud” and “rampant voter suppression.”

“The changes made in this legislation in 2021 are designed to address the lack of elector confidence in the election system on all sides of the political spectrum,” the notation said….

The act prohibits local officials from accepting non-government funds, grants, or gifts in connection with election administration.

In 2023, the Georgia legislature passed SB-222 to bolster the 2021 prohibition to make it a crime.

In protest to the new 2021 measures, Major League Baseball deemed them “restrictive,” and moved that year’s All-Star Game from Georgia to Colorado.

Georgia state Sen. Colton Moore, a Republican, said that although improvements have been made since 2020, much meaningful work is still needed.

“Nothing of substance has changed since 2020. Every mechanism to facilitate a steal is still in place,” he told The Epoch Times. “We must work to eliminate the vulnerabilities still in place today.”

Mr. Moore also highlighted the “ridiculous” number of absentee ballots still used in Georgia elections and said they ought to be restricted to military personnel and medically disabled citizens. He said he was also worried about the institutionalization of the use of absentee ballot drop boxes, which he believes should be done away with altogether.

“We need to make it a legislative priority to stop authoritarian figures like [Fulton County District Attorney] Fani Willis from prosecuting people for merely questioning our elections. Her actions have created a chilling effect among my colleagues in the legislature,” he said.

“Unless we obtain a legislative solution soon, we must resolve to overcome fraud through an overwhelming turnout in November.”

Michigan

Right after being elected in 2018, Michigan’s Democrat Gov. Gretchen Whitmer used her veto power to shoot down nearly 20 election integrity reform bills sent to her desk by the then-Republican-controlled state legislature.

In the 2020 presidential election, President Donald Trump lost Michigan to Joe Biden by 154,000 votes or 2.8 percent.

Afterwards, judges in six different court cases found that Michigan’s Democrat Secretary of State Jocelyn Benson issued inaccurate or legally unauthorized guidance to local officials in the runup to the 2020 general election.

When Ms. Whitmer was reelected in 2022 and Democrats captured control of the legislature, within a year 12 new Democrat-sponsored election laws were enacted—all of which Republicans say loosen security.

The new Democrat-authored statutes extend automatic voter registration to other state agencies and offices beyond the Secretary of State’s office, which issues driver’s licenses in Michigan.

They liberalize online registration and allow a person to apply for an absentee ballot online. They permit 16-year-olds to pre-register to vote.

During the past several election cycles, Democrat activists, backed by out-of-state, big-money donors, effectively used the ballot initiative process to repeal existing election laws, enact new laws, and amend the state constitution. Two of the largest contributors were the Sixteen Thirty Fund ($11 million) and the George Soros-founded Open Society Foundation ($1.2 million)….

The initiative process was also used to weaken photo ID requirements by mandating that election officials accept an affidavit of identity signed by the prospective voter instead. It also enabled people to request to automatically receive an absentee ballot for every election in perpetuity, and it authorized taxpayer-funded, postage-free mailing for people returning absentee ballot applications or mail-in ballots….

The ballot proposals enacting these new laws were approved handily by the Michigan electorate at the polls.

Read the rest here…

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Dear Washington Republicans –

It is high time for you to win over voters – and win elections – the old fashioned way, with powerful economic plans and strategies to: 1) Improve financial security and enact a sweeping debt relief plan for millions of American families (like you did for Wall Street’s banks and insurers during 2008-2010 and again during the Covid years 2021-2022); 2) Reduce the pressures on state and federal government agencies to continue expanding entitlement spending; 3) Get America’s snowballing federal deficits back under control; and 4) Minimize governmental intrusion into the daily affairs of U.S. citizens.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America Leviticus 25 Plan 2025 (11646 downloads )

Inflation Uncertainty Leaves Global Bonds On Thin Ice

ZeroHedge, Feb 12, 2024 | Authored by Simon White, Bloomberg macro strategist Excerpts:

Inflation may have fallen from its peak around the world, but in the inflationary regime in which we remain, upside surprises are more likely.

That would worsen already weak liquidity in global bonds and heighten the risk of rising yields….

Liquidity and inflation are related.

The volatility of inflation, which rises when inflation rises, tracks bond liquidity. Higher inflation volatility typically goes with poorer liquidity in bonds.

As we can see from the chart above, developed-market inflation volatility remains elevated, leaving bond liquidity liable to deteriorate.

Bonds have been trading with a negative skew, shown for the TLT (ETF of long-term USTs) below, which means that poor liquidity is more likely to lead to lower prices, higher yields.

This comes at a time when there are compelling signs of a cyclical upswing in global growth.

The combination of supported growth, receding US recession risk, heightened inflation uncertainty, and a deterioration in bond liquidity is a complete recipe for higher bond yields.

The risk is compounded when taking account of the rarefied view that US bond yields – which have a significant influence on DM yields – will move much higher this year, according to bank surveys.

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Debt reduction / elimination is indispensable to restoring liquidity to bond markets.

There is precisely one plan on America’s table with the power to restore that liquidity.

The Leviticus 25 Plan will generate $112.6 billion annual federal budget surpluses over each of the first five years of activation (2025-2029) – taking an enormous amount of pressure off the credit markets.

The Plan will ignite a long-term economic growth cycle, restore financial security for millions of American families, stabilize the U.S. Dollar, and rejuvenate free-market dynamics and economic liberty.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11631 downloads )

“We’ve gone astray from first principles. We’ve lost sight of the rule that individual freedom and ingenuity are at the very core of everything that we’ve accomplished. Government’s first duty is to protect the people, not run their lives.” -President Ronald Reagan

Fredrich A. von Hayek: “We must make the building of a free society once more an intellectual adventure, a deed of courage…. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.” 

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To help make America’s rebuild a reality…

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11499 downloads )

Clerk of the United States House of Representatives – Roll Call vote H.R. 7024 (see how your Representative(s) voted): https://clerk.house.gov/Votes/202430?RollCallNum=30&BillNum=H.R.7024

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169 Republicans Vote to Expand Welfare, Bill Heads to Senate January 31, 2024 – Excerpts:

169 Republicans joined 188 Democrats to expand welfare. There were only 47 no votes from Republicans.

More Welfare

.@RepThomasMassie on the welfare tax bill: “There’s something in this bill called ‘tax credits,’ but they’re also called ‘refundable.’ So what is a refundable tax credit?

It’s welfare by a different name. We are going to give cash payments, checks to people who don’t even pay… pic.twitter.com/lZGZYImGus | — Rep. Matt Gaetz (@RepMattGaetz) January 31, 2024

“There’s something in this bill called ‘tax credits,’ but they’re also called ‘refundable.’ So what is a refundable tax credit? It’s welfare by a different name. We are going to give cash payments, checks to people who don’t even pay taxes. The hard-working constituents that I represent in Kentucky are tired of getting up at 6am, driving an hour or two to work, working their hind ends off to watch their neighbors collect these checks, of which there will be more of after this bill. It’s just wrong.”…

Where Socialism Works

“SOCIALISM ONLY WORKS TWO PLACES — HEAVEN
WHERE THEY DON’T NEED IT — AND HELL WHERE THEY ALREADY HAVE IT” ~RONALD REAGAN

The Wall Street Journal comments on The GOP’s Spending Boost for Biden

Mind Boggling Support – Social Security and Medicare spending climbed 12% to 13% in the first three months of this fiscal year compared to last. Sweetened subsidies are boosting ObamaCare enrollment. Growing entitlement spending is one reason that government, healthcare and social assistance accounted for more than half of the net new jobs in December, according to the Bureau of Labor Statistics.

The deficit would be even larger if not for the Internal Revenue Service holding back a wave of more stimulus. The agency in September paused processing new claims for the Covid-era Employee Retention Credit owing to concerns over abuse and fraud. By one estimate, the IRS has a $244 billion backlog of claims, which will flood the economy when the IRS processes them.

All of this spending contributes to GDP, at least in the short term. But much of this isn’t productive growth that will improve living standards in the long term, and the bills for all this spending will probably be paid in higher taxes.

That’s why it’s mind-boggling that House Republicans want to help Democrats throw another deficit party … tax credit and extend some business tax breaks through 2025.

Democrats have signed on because they view the child-credit provisions as a down payment on a guaranteed annual income and want to boost flagging business investment this year. The political mystery is why Republicans want to add their signature. The tax bill negotiated by Democrat Ron Wyden and GOP Rep. Jason Smith is another in-kind contribution to the Democratic re-election campaign.

The legislation now heads to the Senate. If the Senate Republicans hoist another surrender flag, Biden would sign the bill.

But it takes 60 votes in the Senate. That’s not a given.

Senators are haggling over spending and immigration legislation. They are scheduled to be on recess for two weeks starting Feb. 12, and aides don’t expect lawmakers to consider the tax bill before then.

“I’m certainly not just willing to let the House pass something and then say, ‘Oh well, we’ll just take that,’” said Sen. John Cornyn (R., Texas), who said he doesn’t feel any urgency to advance the bill. “The price we’re having to pay is pretty outrageous.”

The price is not pretty outrageous, it’s very outrageous.

Question of the Day – Of what possible use are Republicans when the majority vote like Democrats?…

In case you haven’t figured this out, it’s highly inflationary.

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Note: According to the Wall Street Journal, Jan 17, 2024, “The overall deal would cover the 2023, 2024 and 2025 tax years and cost roughly $78 billion.”

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Main Street America Republicans have a powerful alternative plan.

This Plan will lift working Americans up out of poverty and reduce dependence on government. It will revive a macro economic environment in America where federal, state and local governments will be able to cut taxes for families and small businesses, rather than continually dipping into the budget-busting tax credits ‘cookie jar.’

This Plan will reduce entitlement spending, restore financial security for America’s hard-working, tax-paying U.S. citizens, and, most importantly, generate $112.6 billion federal budget surpluses annually (2025-2029).

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11487 downloads )

The GDP Number Was Great… There Is Just One Huge Problem

ZeroHedge, Jan 25, 2024

It now takes $1.55 in budget deficit to generate $1 of growth… and it takes over $2.50 in new debt to generate $1 of GDP growth! 

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The Great Growth Hoax – ZeroHedge, Jan 28, 2024

Excerpts / Insights – Q4 GDP Report:

Peter St Onge writes it up and it is a doozy: “Fresh GDP numbers came in and it was a blowout. The kind of blowout that only a $2.7 trillion government deficit can buy while the private economy crumbles around it. Another couple blowout GDP reports like this and Americans will be living under an overpass.”

The essential ruse comes down to unfathomable amounts of government spending that is being recorded as productivity and output, and interpreted by media as growth. “In the past 12 months the federal deficit increased by $1.3 trillion. Yet we only got half that in GDP—about $600 billion. In other words, everything else shrank. It’s even worse for that brave and stunning Q4—there we got just $300 billion in extra GDP for—wait for it—$834 billion of new federal debt.”

To put a fine point on it: “Essentially, [GDP is measuring] the pace at which we’re going Soviet, replacing private wealth with government waste.” In his interpretation of the data, we are destroying wealth at the fastest rate since 2008.

An analysis by ZeroHedge echoes the same thought.

“While Q4 GDP rose by $329 billion to $27.939 trillion, a respectable if made up number, what is much more disturbing is that over the same time period, the US budget deficit rose by more than 50 percent, or $510 billion. And the cherry on top: the increase in public US debt in the same three month period was a stunning $834 billion, or 154 percent more than the increase in GDP. In other words, it now takes $1.55 in budget deficit to generate $1 of growth… and it takes over $2.50 in new debt to generate $1 of GDP growth!”

To further the analysis, and doing the math: “[E]very dollar in GDP growth cost $1.69 in new debt, and also means that every new job cost future generations of Americans $957,100.48.”

To say this is unsustainable is more than obvious. It is a disaster and this is dragging American prosperity into the pits, if by prosperity you mean quality of life. No matter how many gizmos to which you have access, the resources for living a good life are depleting very fast. The idea of a one-income family is nearly extinct, whereas it was the norm three-quarters of a century ago…

The United States has been the world center of technological innovation during these years, and the historical home for free enterprise and entrepreneurship. We should have had the greatest boom times in our history! Instead, government stole all that energy for itself. It’s a tragedy…

On the good side, we are seeing the evaporation of trust in media, medicine, academia, and government. Large media organizations are laying off workers in droves just to survive, and the woke agenda generally seems on the ropes.

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Again: “To say this is unsustainable is more than obvious. It is a disaster and this is dragging American prosperity into the pits, if by prosperity you mean quality of life. No matter how many gizmos to which you have access, the resources for living a good life are depleting very fast. The idea of a one-income family is nearly extinct, whereas it was the norm three-quarters of a century ago.”

Washington Democrats are feeding America’s debt-binged economic decline.

Washington Republicans have no credible counter-plan to get America’s mushrooming debt cycle back under control and get the U.S. economy back on track. This is one of the most shameful episodes in the history of the GOP.

Main Street America Republicans do have a plan…

The Leviticus 25 Plan will generate average annual budget surpluses of $112.6 billion in each of its first five years of activation (2025-2029) vs current CBO-projected average annual deficits of $1.795 trillion for the same period.

This represents an astounding $1.9 trillion positive budget gain annually (2025-2029) for the U.S. federal budget.

Summary Details:

·  The Leviticus 25 Plan 2025 Generates $112.6 Billion Federal Budget Surpluses Annually (2025-2029). Part 1: Overview, Deficit Projection

·  The Leviticus 25 Plan Generates $112.6 Billion Federal Budget Surpluses Annually (2025-2029). Part 2: Federal Income Tax Recapture; Economic Security / Means-Tested Welfare Recapture.

·  The Leviticus 25 Plan Generates $112.6 Billion Federal Budget Surpluses Annually (2025-2029). Part 3: Medicaid, Medicare, VA, TRICARE, FEHB, SSDI Recapture

·  The Leviticus 25 Plan Generates $112.6 Billion Federal Budget Surpluses Annually (2025-2029). Part 4: Interest Expense Recapture, Totals Summary

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The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2025 (11474 downloads )

The Leviticus 25 Plan – annual economic scoring update. For each of the first five years of activation (2025-2029), The Leviticus 25 Plan will generate average annual budget surpluses of $112.6 billion vs current CBO-projected average annual deficits of $1.795 trillion for the same period.

Overview, Primary Assumptions, Economic Scoring

The Leviticus 25 Plan activation period is slated for the 5-year period beginning in 2025 and ending in 2029. 

1.  The Leviticus 25 Plan – Each participating U.S. citizen will receive a $60,000 deposit into a qualified Family Account (FA) and a $30,000 deposit into a qualified Medical Savings Account (MSA).

All U.S. citizens residing in the United States are eligible to participate, contingent upon meeting qualification standards and agreement to specified recapture provisions. 

Participants (other than ‘custody account’ applicants) must prove stable credit history, stable job history, no recent drug/felony convictions.

These general recapture provisions include:

– Waiving all federal income tax refunds for a period of 5 years.

– Waiving benefits from economic security programs, select benefits from means-tested welfare programs, SSI, and SSDI for a period of 5 years.

– Enrollees in the Medicare, VA Healthcare system, Federal Employees Health Benefits    (FEHB), and TRICARE will be subject to a $6,000 deductible for primary care and outpatient services annually for a period of 5 years.  (See full plan for more details)

Primary scoring assumptions:

The Plan assumes an 80% participation rate by U.S. citizens. Wealthier Americans would choose not to participate, due to the comparative benefit of income tax refund amounts.  Many individuals of lower socio-economic sector would also choose not to participate, due to the comparatively high benefits profiles that they would not wish to give up.

The Plan assumes that participating families would use significant funds to pay down / eliminate debt, and that these longer-term, lower debt service obligations would enhance the financial security of participating families for several decades beyond the opening activation period.  Federal, state, and local government entities would benefit from longer-term tax revenue growth and reduced citizen dependence on government-based entitlement program benefits.

The Plan assumes that dynamic new efficiencies would emerge in the healthcare system – with more families managing/directing healthcare expenditures through their MSAs.

The Plan assumes that apart from the recapture provisions, there would also be significant tax revenue growth for federal, state and local government entities from free-market economic revitalization, more people working and paying taxes, and from the elimination of various income tax deductions (e.g. mortgage / HELOC interest expense).

The Plan assumes that there would not be a massive full-scale move back into the means-tested welfare programs, income security programs, SSI, and SSDI at the end of the initial 5-year activation period. 

The benefits of a free-market economy and newfound economic liberty for American families would provide positive economic inertia throughout years 5-10, and for several decades beyond.

Recapture provisions would provide a substantial federal budget surpluses for each year of the initial 5-year period. Economic growth over the following 10-15 years would generate sufficient recapture funding and tax revenue growth to offset the entire initial Federal Reserve balance sheet expansion.

Significant inertia from The Plan would also provide on-going, market-based growth benefits over succeeding years that far exceed any prospect for healthy economic growth that may be expected under America’s current big-government, central-planning approach.

Dynamic economic benefits would flow from:

– Family level massive debt elimination, financial security gains.

– Timely, sweeping reversal of big government “central planning” control.

– Productivity gains from reversal of work disincentives currently embedded in social programs.

– Economic growth, improved productivity, job creation, free market dynamics.

– Stabilization of bank capitalization, housing market.

– Strengthen / stabilize long-term value of U.S. Dollar.

– Minimizing the role of government in managing, directing, controlling the affairs of citizens.

2.  Federal Budget Deficit Projections – Congressional Budget Office

The Budget and Economic Outlook: 2023-2033 projects budget deficits ranging from $1,571 trillion in 2024, up to $1.855 trillion in 2029, and on up to $2.852 trillion by 2033. Actual deficits for the out years are likely to be higher than CBO projections, based upon history (“actual” versus “projected”).

Congressional Budget Office (CBO) Deficit Projections 2023-2033

CBO deficit projections for target period (2025-2029)

2022:  $1.376 trillion (actual) vs $1.036 trillion (projected)

2023: $1.639 trillion

2024:  $1.571 trillion

2025:  $1.761 trillion

2026:  $1.718 trillion

2027:  $1.709 trillion

2028:  $1.934 trillion

2029:  $1.855 trillion

Total deficits projected 2025-2029:  $8.977 trillion

Total- projected average annual deficits 2025-2029: $1.795 trillion

Source:  CBO 10-Year Budget Projections (2023-2033)  |   https://www.cbo.gov/publication/59159

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