Someone get Larry Kudlow on the phone, because math just called his bluff.
Back on June 29, Larry told Fox News the following about the deficit:
The deficit is coming down and it’s coming down rapidly.
In case you’re the type who enjoys actually seeing someone lie to America on national television (as opposed to just reading the transcript of those lies), here is the moment when Larry gargled those words while sitting alongside CNBC anchor-turned Trump sycophant Maria Bartiromo:
That’s not true. As in, it is a demonstrable lie. Just ask Jeff Gundlach, who said this about Kudlow after seeing that clip:
Now that one is simply off the charts on the ‘Pinocchio meter.
It sure is, Jeff.
For those of us who, like Gundlach, spend our time steeped in this debate, Kudlow’s contention was flat out laughable. All anyone has been talking about for months on end is the deficit and the extent to which Trump’s lunatic plunge into late-cycle fiscal stimulus is set to put the U.S. on an even more unsustainable fiscal path than it was already on.
Gundlach reiterated that point in his latest webcast, highlights from which you can find here, but the clearest expression from Jeff came back in June, when the DoubleLine boss delivered the following assessment:
It’s pretty much unprecedented that we’re seeing this level debt expansion so late in an economic cycle. Increasing the size of the deficit while we’re raising interest rates almost seems like a suicide mission.
You can also ask Goldman about this, if you like. They’ve written voluminously about the problem this year and really, so has every other Wall Street bank. Here’s an excerpt and a set of visuals from one of Goldman’s notes out earlier this year:
Federal fiscal policy is entering uncharted territory [as] Congress has voted twice in the last two months to substantially expand the budget deficit despite an already elevated debt level and an economy that shows no need for additional fiscal stimulus. While most of the recent fiscal expansion has not come as a surprise to us, this nevertheless raises new questions about the plan for US fiscal policy.
Or hell, you could also just ask the CBO, which in April projected that the deficit will hit $1 trillion in 2020, two years ahead of previous estimates:
You get the idea. Everyone knows where this is headed, and while Larry will doubtlessly continue to shout supply-side talking points at the television like an old man screaming at clouds, he won’t be able to escape reality.
Speaking of reality, it came calling on Thursday, in the form of news that the U.S. budget deficit ballooned to $898 billion in the eleven months through August. Do note from the table above that we’re now $94 billion ahead of the CBO’s full-year estimate and in this case, “ahead” is a bad thing. The $898 billion figure compares to $673.7 billion during the same period in FY2017.
For the month of August, the red ink totaled a truly “impressive” $214 billion. That would be (basically) double the $108 billion deficit logged in August 2017.
If you’re wondering what accounts for this, here’s one line item that’s worth zooming in on:
Is this bad news? Well, that depends on how you look at it, now doesn’t it?
We all know Trump’s tax cuts and stimulus aren’t going to “pay for themselves”, because that lie never works out, but one way to think about the numbers released on Thursday is to simply take the Larry Kudlow approach which, again, is simply to look at the widening deficit and claim that in fact, it’s “coming down rapidly.”