Last month job growth rebounded to 162,000, temporarily calming fears of a “no-hire, no-fire” economy squeezed between wartime oil prices, slowing growth and, of course, the ever-popular AI eating all the jobs.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, followed always by a dictatorship."
Especially when the percentage of voters who don't pay any taxes reaches about 50%, as now. Government handouts are completely free when you don't pay any taxes.
You can hardly blame the populace for succumbing to the temptation to vote themselves more free stuff.
Abolishing the income tax and going to a sales tax would help, because everybody would have to pay some tax. Even the underworld of crime, prostituion, drug dealing, etc.
A sales tax would be a heavier tax on the poor, who still have to buy shelter, transportation, food, and energy. The income tax is going nowhere. The GOP won't ever touch that topic.
Exempting everyday essentials is certainly the cleanest, most intuitive way to shield lower earners without setting up another massive government bureaucracy.
States already run that exact playbook every single day. Most state revenue codes do not tax raw milk, bread, produce, or prescription medicine at the grocery store register. A low earner spends the bulk of their paycheck on those core staples, so zero rating basic necessities immediately keeps their effective tax rate minimal without forcing them to fill out paperwork or wait on a government prebate check.
Exempting necessities brings distinct trade offs to consider:
The Rate Creep: Every time you carve out an exemption, the tax base shrinks. If food, residential rent, electricity, healthcare, and water are totally exempt, the tax rate on everything left, like electronics, vehicles, dining out, and appliances, has to climb higher to raise the exact same total revenue.
The Definition Circus: Bureaucrats end up spending months arguing over absurd line items. In state systems, a whole pumpkin is considered non taxable produce in October, but paint a face on it and it becomes a taxable holiday decoration. A bag of plain flour is tax exempt food, but sweet bakery items get hit with full sales tax. Lobbyists instantly swarm to classify their client products as essential.
Credit Masking: When buyers roll tax, title, and dealer fees into a seven year auto loan, they fixate entirely on the monthly payment figure rather than the raw cost. That habit insulates buyers psychologically, but financing a 25 or 30 percent sales tax over 84 months adds brutal compounding interest costs over time.
The appeal of the consumption model remains unmatched when it comes to freedom. You pay tax when you choose to spend, not when you generate productive labor. A system with zero taxes on raw essentials, zero taxes on used items, and zero intrusion into your personal paychecks and bank accounts beats filing 80,000 pages of income tax forms every single spring.
That is because we now have a fiat currency. If we used a gold-based currency, like we once did, the money could not flow unless the government bought more gold.
Is this like the $2,000 DOGE check or the $2,000 tariff check? Lies, all lies. The last thing they want to do is give up control of money they can waste down some war rathole.
Even though I'm a great fan of president Trump, I shuddered at this suggestion of another huge handout. Hopefully either congress will table the idea or at least limit it to those who are working and producing.
One thing that really did happen is the Trump accounts, which I think is a great program - although it was really Brad Gerstner and Michael Dell and Ted Cruz that came up with it. They called it the Invest America Act.
The President just recognized it and promoted it. It was congress that decided to put his name on it and call it Trump Accounts. That was a mistake, IMO, because some Trump haters are actually depriving their own babies of this wonderful opportunity simply because his name on it. They're shooting themselves in the foot and taking it out on their children. Unintended consequences.
If the federal system wasn’t largely a uni-party anymore, I think things could be improved by Congress. But since the vast majority are all drinking the same kool-aid it will take something drastic to change the political landscape. 40 trillion in debt doesn’t seem to be drastic in their minds apparently.
I think a sales tax instead of income tax would help, because everyone would be paying taxes, not just half the voters, so maybe they'd think twice about voting for handouts if they each knew it was going to cost them personally, in higher taxes.
Peter, spot on analysis. I like the chart that shows the deficit and headcount going in the opposite direction. I agree with what you said at the bottom of the article, and I do not think there is any way to stop the cycle. I think it will play out like all empires do. The only thing you can do is protect yourself and your family from currency debasement.
Here is my report card on Trump so far.
The Good:
1) Trimming bureaucratic headcount in DC and cutting dead weight.
2) Securing the border.
3) Ending DEI mandates across agencies.
Appointing Kevin Warsh to head the Fed, even if it feels accidental because Kevin is a hawk who respects sound money.
The Bad:
1) The debt and deficits keep climbing. The national debt is now past 40 trillion dollars, and the annualized deficit is running over 2 trillion dollars.
2) Demanding artificially low interest rates. Easy money is not sound money. Low rates and quantitative easing have been melting the purchasing power of honest savers since 2010.
The broader problem with both Trump and the Republicans is the idea that we can grow our way out of this debt. I like cutting regulations, but forcing the Fed to artificially cut rates when inflation is running above target (2% , should be Zero) so the economy runs hot is something I do not like.
Cutting red tape is great, but artificially driving down borrowing costs is not freeing the market. It is gambling with the purchasing power of savers to fuel another debt boom. When you rig interest rates, you dilute savings, ignite inflation, and distort capital. The bedrock of any real economy has to be sound money, not a new flavor of monetary manipulation. Cut the regulations, stop subsidizing cheap credit, let the market discover the real price of money, and let genuine productivity do the work. Hopefully Warsh stays stubborn, shrinks that balance sheet, and forces the government to live within its means.
The deficit is not decreasing even though government payroll is, is because government payroll is only one component of spending. And not the largest one.
You're going to have to cut the handouts to have any chance of cutting the deficit.
Which is likely why a lot of DOGE's recommendations (they didn't have the power to cut, only recommend) have not been implemented.
"Want it to grow fast and elect Democrats. Want it to grow slightly slower and elect Republicans. But nothing stops this train."
One could argue this never-ending US/Israel War Against Iran is turning this upside down. Costs for the war are already estimated to equal $100B and that doesn't measure the increased energy costs to Americans.
I personally believe this Administration's goal is to destroy America's economy. Alienate Canada, our closest trading partner and mock them as becoming a US state. Start an unconstitutional war and keep it going because, like the Tar Baby, Trump is stuck to this war because we know Trump NEVER makes a bad decision (or will admit publicly for doing so). Diesel fuel is the highest price it has ever been and the cost will trickle through to everything from food to everything delivered. The Canada tariffs will affect elections in those states especially which border Canada. I believe Trump slept through economics classes, assuming he ever took one. If he did, he learned nothing. Tariffs are not designed to bring manufacturing, they are designed to protect current industry. The lies about reindustrialization is shown to be a lie by the continuing drop in manufacturing jobs, month after month after month.
Don't worry...the vote for a retardican payoff of $5000 will spur growth in the economy of about .02%.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, followed always by a dictatorship."
Attributed to Alexander Fraser Tytler
Especially when the percentage of voters who don't pay any taxes reaches about 50%, as now. Government handouts are completely free when you don't pay any taxes.
You can hardly blame the populace for succumbing to the temptation to vote themselves more free stuff.
Abolishing the income tax and going to a sales tax would help, because everybody would have to pay some tax. Even the underworld of crime, prostituion, drug dealing, etc.
A sales tax would be a heavier tax on the poor, who still have to buy shelter, transportation, food, and energy. The income tax is going nowhere. The GOP won't ever touch that topic.
Yes, you have a very valid point. There would have to be some kind of exemption to protect the poor.
Exempting everyday essentials is certainly the cleanest, most intuitive way to shield lower earners without setting up another massive government bureaucracy.
States already run that exact playbook every single day. Most state revenue codes do not tax raw milk, bread, produce, or prescription medicine at the grocery store register. A low earner spends the bulk of their paycheck on those core staples, so zero rating basic necessities immediately keeps their effective tax rate minimal without forcing them to fill out paperwork or wait on a government prebate check.
Exempting necessities brings distinct trade offs to consider:
The Rate Creep: Every time you carve out an exemption, the tax base shrinks. If food, residential rent, electricity, healthcare, and water are totally exempt, the tax rate on everything left, like electronics, vehicles, dining out, and appliances, has to climb higher to raise the exact same total revenue.
The Definition Circus: Bureaucrats end up spending months arguing over absurd line items. In state systems, a whole pumpkin is considered non taxable produce in October, but paint a face on it and it becomes a taxable holiday decoration. A bag of plain flour is tax exempt food, but sweet bakery items get hit with full sales tax. Lobbyists instantly swarm to classify their client products as essential.
Credit Masking: When buyers roll tax, title, and dealer fees into a seven year auto loan, they fixate entirely on the monthly payment figure rather than the raw cost. That habit insulates buyers psychologically, but financing a 25 or 30 percent sales tax over 84 months adds brutal compounding interest costs over time.
The appeal of the consumption model remains unmatched when it comes to freedom. You pay tax when you choose to spend, not when you generate productive labor. A system with zero taxes on raw essentials, zero taxes on used items, and zero intrusion into your personal paychecks and bank accounts beats filing 80,000 pages of income tax forms every single spring.
100% Agree, I have always said we should get rid of the IRS and have sales tax.
I was making a chart about something else and was using some stats from the FED and you are right about only half working, it is interesting.
U.S. Statistics: 340 Million People in U.S. - 151 Million Employees
https://www.bls.gov/cps/data/aa2024/cpsaat05.htm
Remember, retirees are ever increasing, so that takes a lot of people out of the employed side of the equation.
Enforcing the I-tax costs more than it yields.
Sales tax is the best option.
That is because we now have a fiat currency. If we used a gold-based currency, like we once did, the money could not flow unless the government bought more gold.
Agreed. Fiat is the money problem.
Is this like the $2,000 DOGE check or the $2,000 tariff check? Lies, all lies. The last thing they want to do is give up control of money they can waste down some war rathole.
Even though I'm a great fan of president Trump, I shuddered at this suggestion of another huge handout. Hopefully either congress will table the idea or at least limit it to those who are working and producing.
It will never happen, he's full of hot air and has promised something like $8,500 per person worth of stuff that never materialized...
One thing that really did happen is the Trump accounts, which I think is a great program - although it was really Brad Gerstner and Michael Dell and Ted Cruz that came up with it. They called it the Invest America Act.
The President just recognized it and promoted it. It was congress that decided to put his name on it and call it Trump Accounts. That was a mistake, IMO, because some Trump haters are actually depriving their own babies of this wonderful opportunity simply because his name on it. They're shooting themselves in the foot and taking it out on their children. Unintended consequences.
I had made a YouTube video on why the founders wanted a Republic, but I don't think people get it 😔
https://youtube.com/shorts/zzjZ_hjLvro
Great short!
Sucks for Henry.
I think we're Henry.
I am glad someone gets it! Thank you Helen.
Thanks for creating the short. It's hilarious and true.
If the federal system wasn’t largely a uni-party anymore, I think things could be improved by Congress. But since the vast majority are all drinking the same kool-aid it will take something drastic to change the political landscape. 40 trillion in debt doesn’t seem to be drastic in their minds apparently.
Exactly! I think they look at Japan and think that it's ok, because they are doing it.
"40 trillion in debt doesn’t seem to be drastic in their minds apparently."
I think a sales tax instead of income tax would help, because everyone would be paying taxes, not just half the voters, so maybe they'd think twice about voting for handouts if they each knew it was going to cost them personally, in higher taxes.
Agreed.
Peter, spot on analysis. I like the chart that shows the deficit and headcount going in the opposite direction. I agree with what you said at the bottom of the article, and I do not think there is any way to stop the cycle. I think it will play out like all empires do. The only thing you can do is protect yourself and your family from currency debasement.
Here is my report card on Trump so far.
The Good:
1) Trimming bureaucratic headcount in DC and cutting dead weight.
2) Securing the border.
3) Ending DEI mandates across agencies.
Appointing Kevin Warsh to head the Fed, even if it feels accidental because Kevin is a hawk who respects sound money.
The Bad:
1) The debt and deficits keep climbing. The national debt is now past 40 trillion dollars, and the annualized deficit is running over 2 trillion dollars.
2) Demanding artificially low interest rates. Easy money is not sound money. Low rates and quantitative easing have been melting the purchasing power of honest savers since 2010.
The broader problem with both Trump and the Republicans is the idea that we can grow our way out of this debt. I like cutting regulations, but forcing the Fed to artificially cut rates when inflation is running above target (2% , should be Zero) so the economy runs hot is something I do not like.
Cutting red tape is great, but artificially driving down borrowing costs is not freeing the market. It is gambling with the purchasing power of savers to fuel another debt boom. When you rig interest rates, you dilute savings, ignite inflation, and distort capital. The bedrock of any real economy has to be sound money, not a new flavor of monetary manipulation. Cut the regulations, stop subsidizing cheap credit, let the market discover the real price of money, and let genuine productivity do the work. Hopefully Warsh stays stubborn, shrinks that balance sheet, and forces the government to live within its means.
Under bad economic policy, adding at least (so far) $100B to the National Debt for the War against Iran for Israel.
Excellent analysis 👏👏
Maybe the next article could be comparing GDP growth and deficit spending and then what ultimately happens if this thing collapses?
Good idea. Also, take government spending out of GDP .
Great summary of how and why our democracy is failing.
Still, at the same time, with this surge of your and many like-minded postings, it seems like our true Republic is rising up.
Peter…
https://substack.com/@theleahfiles/note/c-334354184
The deficit is not decreasing even though government payroll is, is because government payroll is only one component of spending. And not the largest one.
You're going to have to cut the handouts to have any chance of cutting the deficit.
Which is likely why a lot of DOGE's recommendations (they didn't have the power to cut, only recommend) have not been implemented.
When the Fraud is STOPPED and the HANDOUTS to NGO'S stop then you will see that a balanced budget is in sight.
The House hasn't even proposed a budget for decades and CR's never cut the Budget.
We need to vote out all the people in Congress that don't represent us and work for lobbyists who want money to be paid to large corporations.
Just look at Ted Cruz who gives Billions to Foriegn Countries but opposed the $5,000 dividend.
I say give Trump 9 months after we take control of Congress in November and the factory's start to open.
"Want it to grow fast and elect Democrats. Want it to grow slightly slower and elect Republicans. But nothing stops this train."
One could argue this never-ending US/Israel War Against Iran is turning this upside down. Costs for the war are already estimated to equal $100B and that doesn't measure the increased energy costs to Americans.
I personally believe this Administration's goal is to destroy America's economy. Alienate Canada, our closest trading partner and mock them as becoming a US state. Start an unconstitutional war and keep it going because, like the Tar Baby, Trump is stuck to this war because we know Trump NEVER makes a bad decision (or will admit publicly for doing so). Diesel fuel is the highest price it has ever been and the cost will trickle through to everything from food to everything delivered. The Canada tariffs will affect elections in those states especially which border Canada. I believe Trump slept through economics classes, assuming he ever took one. If he did, he learned nothing. Tariffs are not designed to bring manufacturing, they are designed to protect current industry. The lies about reindustrialization is shown to be a lie by the continuing drop in manufacturing jobs, month after month after month.