Taps Coogan – May 24th, 2021

Enjoy The Sounding Line? Click here to subscribe.

Here is yet another dark reminder of just how extreme current levels of deficit spending have become. The following chart, from Jim Bianco via The Daily Shot, shows the percentage of federal spending covered by tax revenue since the nation’s founding in the late 1700s.

The chart above is a reminder that taxes now cover less than 50% of federal spending. The only other times that deficit spending has been this severe were the peak of World War II, the depths of the Great Depression, the end of World War I, the Civil War, the Panic of 1837, and shortly after the War of 1812 when much of DC was burned to the ground.

Those previous examples of extreme deficit spending represented brief surges caused by very specific events. In each case, the nation had been running a surplus just a few years prior and returned to a surplus within a few years. Even between the Great Depression and World War II, the US managed to briefly get back to a balanced budget. The current deficit on the other hand, while undoubtedly exacerbated by Covid, has been building for a generation. It’s structural. It may shrink slightly in the coming years, but even getting back to the trillion dollar deficit of 2019 is a pipe dream.

Instead of worrying about this, the race is still on in Washington to spend as much money as quickly as possible before the political winds change and the other team comes in and, if history is any guide, does more-or-less the same thing. Voters like free money, politicians like giving it to them, and everyone seems perfectly fine believing the laughably incredulous lie that some taxes on rich people and ‘evil’ corporations will pay for it.

Would you like to be notified when we publish a new article on The Sounding Line? Click here to subscribe for free.