Fiscal hawks weren't optimistic when Kevin McCarthy was elected Speaker of the U.S. House. The California Republican's track record was dismal when it comes to spending restraint.
Nearly 5 months into his term, it is now apparent McCarthy has no intention of holding the line against government expansion.
He just announced a deal with Biden to push off all further debate on the debt ceiling until 2025 while avoiding any reduction in spending.
He is, of course, selling the deal as if it were a crushing blow to Democrats.
McCarthy said, "Right now, the Democrats are very upset… there's nothing in the bill for them. There's not one thing in the bill for Democrats."
It isn't clear what he is talking about. The IRS is going to hang onto $79 of the $80 billion in increased funding it received in last year's Orwellian "Inflation Reduction Act."
There are no reductions for the rest of the federal bureaucracy, and there is a healthy increase for defense spending, including more handouts to Ukraine.
"Discretionary" spending today represents only about a third of the total federal budget.
The rest is comprised of defense, entitlements such as Social Security and Medicare, and interest payments on the federal debt.
These supposedly non-discretionary categories are ballooning, and meaningful changes are politically untenable.
It only gets harder for politicians to balance the budget as time goes by.
Sure, it isn't over yet. McCarthy's budget deal still has to pass a vote in the full House. In the end, however, the debt ceiling will indeed be raised substantialy.
The key point, for gold and silver investors at least, is there will be no political solution to the inflationary problem at the heart of our monetary system. Americans can expect perpetual deficit spending and trillions per year of new debt issuance.
At this point, the budget deficits can only be supported by money printing and debt monetization from the Federal Reserve.
Federal obligations will be "paid" with ever more rapidly devaluing dollars. The nation is on a one-way road to ongoing currency debasement.
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