The federal government has already pledged $2 trillion to help households and businesses withstand the pressure placed on them from the coronavirus. But the final price tag could end up far higher, perhaps as much as $5 trillion or more.<\/p>\n
The national debt was already at $23.5 trillion before the CARE Act stimulus bill was passed, and it\u2019s shot up nearly $1 trillion since the bill\u2019s passage. By the time the bill\u2019s money is spent, the national debt will have increased nearly 10%, and if Congress decides to pass additional stimulus spending, it could end up increasing over 20% by the end of the year.<\/p>\n
You might ask yourself how Congress expects to pay for all of this spending, particularly since the budget deficit was already expected to exceed $1 trillion this year. In the short term, all of that new spending is going to be funded by debt issuance. That\u2019s why the national debt will increase so much. But who\u2019s going to purchase that debt?<\/p>\n
Ultimately the Federal Reserve will end up monetizing a significant portion of that debt, purchasing it nearly directly from the Treasury. But down the line it will be US taxpayers paying for that new spending.<\/p>\n
The increased amount of debt purchased by the Fed will be paid for by new money being created out of thin air. That new money will devalue the purchasing power of existing money, thus stealthily taxing investors and savers by reducing their ability to purchase the goods and services they need. Prices will rise, the dollar\u2019s value will fall, and consumers will be worse off.<\/p>\n
That increased debt also means increased interest payments, which will take up an even larger portion of the federal government\u2019s budget. So either the government increases taxes to pay for that interest spending, or it cuts down on services. Either way, taxpayers are harmed.<\/p>\n
There\u2019s just no way to sugarcoat things \u2013 Congress is spending like a drunken sailor, aided and abetted by the Federal Reserve. And ordinary Americans will have to pay the bill for that spending sooner or later. They may not pay the bill upfront, but when it comes time to retire, they\u2019re going to bemoan the decreased purchasing power and higher taxes that result.<\/p>\n