Watch for Another Spending Spree From Lame Duck Congress

So far this year we have had official estimates for economic growth and inflation for the first three quarters — or nine months — of 2022. The results are very poor. First, the economy has not grown. Through the third quarter, real GDP is essentially flat. Second, the inflation rate has come in at more than 7 percent. So, a flat-line economy with a more than 7 percent price increase. Those are the numbers. There’s some evidence in the most recent figures that inflation is slowing to around 5 percent using a base rate the Fed follows. Then again, though, the Cleveland Fed has a median CPI that is still 7 percent. As I’ve said before, the index of leading indicators is plunging, the M2 money supply growth has crashed to around zero percent from 30 percent, and the yield curve in the Treasury market between 3-month bills and 10-year bonds has inverted. The likelihood of a recession in 2023 is high. That should bring inflation down a bit more, but it’s a very blunt and painful way to do it. Now, we have this lame-duck Congress that may well embark on a lame-duck spending spree that, if enacted, will reverse what little progress has been made on inflation. As the WSJ editorializes today, federal spending has increased by roughly $5 trillion in the two Biden years. That’s what put the pressure on the Federal Reserve to go on a money-printing binge. Yet recent fiscal and monetary restraint may be on the verge of being badly broken. In their last gasp, House Democratic liberals are dealing for at least $150 billion in new spending for a so-called giant omnibus bill that would wreak havoc on proper budget processes and end what little fiscal restraint currently exists. It could well be more, including a $1.6 trillion child tax credit expansion that would provide parents well over $100 billion with no work requirements. That’s right: More welfare without work, which has become a radical Democrat battle cry. Then there’s more Covid money and Ukrainian aid and maybe some tax extenders. All told, according to the WSJ editorial, non-defense spending would rise another 10 percent on top of last year’s 7 percent, and defense spending would increase nearly 10 percent on top of last year’s 6 percent. This is not restraint. This will not restrain inflation. This will not provide any tax or regulatory supply-side incentives by reducing the burden of centrally planned big government. The talk is that Republicans in the Senate are going to go along with this spending spree, that the GOP Senate leadership will make a deal on a so-called omnibus spending bill. This is at the heart of the inflationary fiscal breakdown that we have experienced in recent years. Four people gather in a room and make a deal covering a couple thousand pages and maybe a couple of trillion dollars of new spending, and no one will know what’s in that package until it’s voted on and printed up — and even then, it will take months, if not years, to know what’s there. There will never be any true oversight or monitoring of how the taxpayer’s money is being squandered by a small, selfish cadre of leaders with very little interest for the public well-being and economic prosperity. There is no budget resolution for the next year. There are no committee meetings for the 12 appropriation bills. No expert witnesses to debate the merits of the policies or the spending levels. In other words, no regular order. The Democrats, with Republican cooperation, are going to try to get this done in the lame-duck session before the public can wake up to the fiscal damage and the potential for yet more inflation, more sinking real wages, higher grocery and energy bills, and a deeper recession. This is no way to conduct economic policy. It’s a $6 trillion budget and it just keeps growing, and it’s time somebody — presumably Republicans — put an end to this fiscal insanity and return to proper policy and budget-oriented processes. I mean, it’s just a big problem, and I want to warn you about it. Hats off to the Journal’s editorial — it’s something we’ve talked a lot about on our show. From Mr. Kudlow’s broadcast on Fox Business News.

Watch for Another Spending Spree From Lame Duck Congress

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