The Real Reason The Government Won’t Let Markets Crash

[00:00:02]While everyone is waiting for a big crash, what they're forgetting is the US government depends on consumer spending, tax collection, and asset appreciation in order to make things work. Yeah, but I think we first got to take a look at the financial condition of the US. As you guys know, uh most of you probably know, and you know, everything boils down to the same math problem that we've been talking about real estate the whole time. So, you personally have a financial statement for your personal net worth, your home, um all your assets. We have one, each property has one. You go income minus expenses minus debt equals cash flow, as you guys know. So, I think it's important that we first start with the US's financial statement. So, Jerry, could you pull that up real quick? Cuz I think this is a really interesting thing, and hopefully you guys all know this.

[00:00:57]But right now, the US federal government pulls in about 5.23 trillion in revenue.

[00:01:05]And these are the categories. So, you know, half of that, let's say, comes from the individual tax.

[00:01:12]Uh 33% of that comes from payroll. And then, oddly enough, you know, what's in the news most is this corporate income tax.

[00:01:20]It's about eight, almost 9%. And there's your tariff number. Now, of course, this is new, fairly new, um under the Trump administration. But the most important thing to look at is the spending. Now, obviously, if you guys were in this situation, you'd probably file bankruptcy because you can't spend $7 trillion when you only have 5.23 coming in. Uh so, that's really the point of this. And uh obviously, uh little over trillion of that is Social Security, you've got Medicare, Medicaid. But take a look at the brown box in the middle there, and that's what we're going to kind of focus on.

[00:01:58]Because our interest payment on our debt, which is right now at $39 trillion, is almost a is almost a trillion dollars a year. So, our debt payment is about a trillion dollars a year. Now, obviously these are moving and this is through September 2025. Uh thanks, Jerry. That's that's perfect.

[00:02:18]So, the reason why I wanted to start with that is because the only way that you if you guys were in this exact same situation, the only way for you to really climb out of this is growth. That's it, right? Like asset prices and growth. And so, that's why we really felt like this was a really, really, really good live for today to be able to talk about how the US cannot afford a recession.

[00:02:43]Yeah, I mean I think it's important to note, you know, going into a recession already in so much debt. You know, when our economy was good, we were still running a deficit. So, you have to really think about that. Our economy was good the last few years. You could say it was on fire. And we were still running a deficit. So, now going into a recession, that would put us even more in a deficit. So, the government makes money when people are working, when asset prices are going up, when businesses are expanding and selling because they make a lot of their money through income tax and also capital gains tax. Yeah, and the last time that the US was um I guess in a surplus situation, believe it or not, this is a 20 01. So, 2001 was the last time that the US actually had, you know, a budget that actually produced surplus, you know, all things being equal. So, so this is the 25th anniversary right now, guys, like for for us being negative the whole time.

[00:03:42]And why is that important? Because it's no different if you guys had yourselves in that position, you would be stressed, a little have a little anxiety, a little frustrated over the amount of debt and the debt payment. In this particular case, as we know, um when those things don't work, what happens? Then the the government figures out a way to kind of print to be able to pay for these kinds of things. And when you add that much more money into the economy, of course, more dollars in the economy, that's inflationary. And and so that's kind of the next piece. I think it's important also understand what a recession is.

[00:04:21]So, just in a simplistic view, it's two quarters of negative GDP or gross domestic product in a row.

[00:04:28]So, you know, call it 6 months.

[00:04:31]Now, that's the the technical term.

[00:04:34]What it really means is that that uh the economy is is moving backwards. You know, it's it's it's it's it's not producing more.

[00:04:43]Um it's it's actually it's out of balance, so it's negative. And so that's what a recession means. And so um Jerry, let's take a look at the national debt because I think uh we can kind of show you guys.

[00:04:54]Now, we know that it was it was a net surplus in 2001, and this picks up in 2015. But this is really interesting.

[00:05:02]And by the way, this is not a red or blue administration issue. This has been going on for a while, but you can kind of see today, as of April, which is last month, we're 39 trillion.

[00:05:17]And it it's gone up in just a 10-year period, it's it's doubled, right? From from 18 trillion all the way up to uh 37 trillion and uh by the end of 2025. Thanks, Jerry.

[00:05:30]So, so what does all this mean, right?

[00:05:33]So, that's actually what we want to get to. So, when you're in that that much debt, you you know that you have these huge interest payments, you know that your expenses are rising, and what are your options? Your options are to go after, obviously, the tax base Uh or as as we started talking about here, the increase in asset prices, the consumer spending, and the tax revenue. Those are those are ways for us to to pay for all this stuff. Yeah, and there's only so many ways to pay for it. Like I know people listening can say, "Well, you can just print." And we are and we will. But, you know, when you start to hurt your, you know, tax base, then that's just going to increase the printing and make our currency less reliable because what other countries are looking at when they're looking at our currency is partially how much we're printing, but partially how we're operating everything. So, you know, that tax base is important to the government for money, but also for their records and that make them more trustworthy that they're collecting tax. So, basically, you know, on capital gains, you know, it's what, like 20% or something?

[00:06:41]They're 25% right now. Yeah, it's a little higher, but yes. Yeah. And so, those are big numbers. You know, when a when a home increases in value, especially an investment home, when multi-family increases in value, when stocks increase in value, everybody's paying tax on that. And there's been a big push, right, to increase taxes on more wealthy people, but that only works if they're actually making money. You know, if people aren't making money, there's less wealthy people to even tax.

[00:07:08]So, it's a bigger issue than just we need to just print.