So far this year we have official estimates of economic growth and inflation for the first three quarters or nine months of 2022. The results are very negative.
First, the economy did not grow. Through the third quarter, real GDP remains stable for the year. Second, the rate of inflation has reached 7%. Therefore, the economy is flat-line, with a 7% + increase in value. It’s numbers. They are factoids. That’s all there is. Now, there is some evidence that inflation is slowing in the latest numbers, perhaps to around 5% using the Federal Reserve’s target interest rate. But, again, the Cleveland Fed has a median CPI that is still around 7%.
As I said before, the list of leading indicators is falling, the growth of M2 money has dropped from about 30% to close to 0%, and the yield in the Treasury market between 3-month T-bills and 10- year bonds has entered. Right? Short trees are higher than tall trees.
DEMOCRATS COULD ADD $500B IN NEW DEBT ON LAST CONGRESSIONAL AUTHORITY BOOKS.
The probability of a recession in 2023 is very high. Now, all that can lead to recession, but it’s a very short and painful way to do it.
So, we have this lame-duck Congress, which, unfortunately, may start spending lame bills that, if enacted, will reverse what has been a successful process. According to the Wall Street Journal editor today, federal spending has increased by nearly $5 trillion over the last two years of Biden’s tenure. This is what caused the Federal Reserve to start printing money. Current monetary and financial restrictions can be broken down significantly. That is my concern.
Finally, the House Democratic liberals are spending at least $150 billion to spend on the so-called giant omnibus bill and this would undermine the proper budget process and end the current fiscal restraint. It could be more, including expanding the $1.6 trillion child tax credit that would give parents of children more than $100 billion a year without work. That’s right. More benefits without jobs, which has become the battle cry of democracy.
Then there is more money for COVID and Ukrainian aid and maybe more tax increases. All in all, according to the WSJ editor, non-defense spending will rise 10% on top of last year’s 7% and defense spending will rise about 10% on top of last year’s 6%.
This is not a ban. This will not stop inflation. This does not provide any tax and regulatory incentives to reduce the burden of large government planning. Rumor has it that Senate Republicans will go along with this spending spree. Rumors are that the GOP Senate leadership will strike a deal on the so-called omnibus bill. This is at the heart of the cost of inflation we have experienced in recent years.
Four people will get together in a room and make a deal with several thousand pages, maybe several trillion dollars of new money and no one will know what is in the package until it is voted on and published and even then, it will take. months, if not years, to find out what is available. There will be no real oversight or oversight of how taxpayers’ money is being spent by a small, self-serving group of leaders who have no real interest in public welfare and economic development.
There is no budget plan for next year. There are no committee meetings for the 12 appropriations bills. There are no expert witnesses to discuss favorable policies or amounts. In other words, there is no fixed order. And the Democrats, with a coalition of Republicans, will try to make this happen in a paralyzed area before people wake up to the economic damage and the possibility of rising inflation, real wages sinking, higher grocery and energy bills. and a severe recession.
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This is not a method of economic policy. It’s a $6 trillion budget and growing and it’s time for someone – someone, maybe the Republicans – to put an end to this fiscal madness and get back to proper policy and budgeting methods. I mean, it’s a big problem, people, and I want to warn you about it. Journal editor’s hats, that’s what we talked about a lot on the show and that’s my downfall.
This article was adapted from Larry Kudlow’s opening commentary on December 1, 2022, “Kudlow.”