Peter Schiff: When Exactly Are They Going to Deal With the Debt?
Even as the fiscal 2020 budget deficit surged past $3 trillion, more than double the previous record deficit, US Treasury Secretary Steve Mnuchin called for more federal spending, saying “now is not the time to worry about shrinking the deficit.” Of course, he wasn’t worried about shrinking the deficit before the pandemic either. Peter Schiff talked about the looming debt crisis during his podcast.
Mnuchin isn’t alone in saying the deficit doesn’t matter – at least right now. Former Treasury Secretary Jack Lew appeared on CNBC and also said the federal government needs to spend more stimulus money and we can’t afford to worry about the ballooning deficit. Lew co-wrote an op-ed published by the Washington Post with former Treasury Secretary Robin Rubin. The duo said the stimulus needed to be a large as possible, “preferably more than $2 trillion.”
With a pandemic raging amid an ongoing, deep recession, this isn’t the time to let deficits stand in the way of adequately addressing the crisis and the great need it has created.”
We have bipartisan agreement here – spend more money! The only disagreements revolve around how much to spend and what precisely to spend it on.
Peter said it’s ironic that we even have a secretary of the Treasury.
The treasury is empty. It really should be the secretary of the debt because that’s all we have. We have a gigantic pile of debt. And really what the job of the secretary of the debt is is to make the debt bigger and to make sure that the people lending us the money don’t stop. So, it’s really a giant con-job where you have to go out there and enable debt.”
In the past, the strategy was to convince the world to buy US debt. Now they’ve even abandoned that and pretty much left it to the Federal Reserve to backstop the borrowing. The Fed works hand-in-glove with the US Treasury to enable borrowing and spending. Mnuchin said in an interview that he’s on the phone with Jerome Powell every day. That raises a question: whatever happened to the “independent” Fed?
The whole idea behind an independent Federal Reserve is that the Federal Reserve is not working hand-in-glove with the US Treasury. The idea was they didn’t want the US government to have its hands on the printing presses. … You want to have some kind of buffer between government – Congress – spending the money and the Federal Reserve that’s creating it. But when you have these guys working together; they’re on the phone constantly; they’re like partners in crime now ripping off the American public where the Fed is actually acting as a branch of the Treasury Department. This is what we don’t want.”
But this is what we have. And it explains how the US government managed to get more than $26 trillion in debt with a debt-to-GDP ratio of 136.7%.
Peter pointed out that while Mnuchin keeps saying we shouldn’t worry about the debt when the economy is bad, he wasn’t worried about the debt when the economy was supposedly good. It wasn’t long ago that Donald Trump was bragging that we had the strongest economy in the history of America – even in the history of the world.
Yet, when we had the strongest economy, or they were telling us that we had the strongest economy in the history of the world, were we worried about the debt then? No. Did we do anything about the debt then? No. Well yes, actually we did do something about the debt. We made it bigger.”
In fact, the US was already on track for a $1 trillion deficit in FY2020 before the pandemic. The US government had only run deficits over $1 trillion four times before – all during the great recession. In fiscal 2019, the Trump administration ran the fifth-biggest deficit in history.
What did Donald Trump do under the guidance of the Secretary of the Debt, Steven Mnuchin? What did he do? He increased government spending and cut taxes. So, in this great economy, in the greatest economy ever, we took the greatest deficits ever and made them even bigger. So clearly, Steven Mnuchin does not think that the time to deal with the debt is when the economy is strong. Now, he also says you don’t want to deal with the debt when the economy is weak. Well, if you’re not going to deal with the debt when the economy is weak, and you’re not going to deal with the debt when the economy is strong, well then when are you going to deal with the debt? Well, the answer is never.”
But at some point, the debt will become a crisis and they will be forced to deal with it – or at least respond to it. And at that point, the options become severely limited.
When times are bad, everybody wants to fill up the punch bowl or spike it with more alcohol. And when times are great, nobody wants to be the guy to take it away. So, we never get to deal with the deficit. Until, of course, we are forced to because it’s a crisis. And that is where we’re headed.”
In this podcast, Peter also broke down some economic numbers and talked about the favorite Democrat policy – soak the rich. Peter said that will drown everybody else.