E.J. Antoni and Dave Brat appeared on Wednesday’s WarRoom and discussed the challenges of U.S. government spending and deficits and the limitations facing both political candidates. They emphasize the significance of past economic crises, particularly the 2007-2008 financial crisis, and how it shaped the current populist movement. Both men stress that resolving America’s economic issues will require bold fiscal reforms beyond tax cuts and superficial spending adjustments.
The Two Types of Government Spending
E.J. Antoni emphasizes the need to distinguish between two forms of government spending. He refers to direct government expenditures and government transfers. Antoni highlights that direct government spending involves direct investments, like infrastructure and defense, while government transfers include social programs and welfare.
He stressed on the WarRoom that the U.S. doesn’t have a revenue problem but a spending issue:
“We are essentially collecting the maximum amount of revenue we can right now relative to the size of the economy.”
Antoni insists that reducing spending is the solution. Even increasing tax rates would not significantly boost revenue; instead, it could stifle economic growth.
Populism Rooted in the 2007-2008 Financial Crisis
Dave Brat, former Congressman and economist, points to the 2007-2008 financial crisis as the foundational moment for modern populism. According to Brat, the Federal Reserve’s policies during that time—printing massive amounts of money and bailing out banks—set the stage for a political shift. This situation laid the groundwork for Steve Bannon’s populist thesis, emphasizing the consequences of prioritizing Wall Street over Main Street.
“The by-coastal elites have always bailed out Wall Street over the American people, placing the full cost on ordinary citizens,” Brat explains.
This dissatisfaction led to a rise in populism, a movement advocating for ordinary people and challenging the status quo.
Concerns Over Budget and Deficit Projections
Both Antoni and Brat expressed concerns about the projected budgets and deficits under potential administrations.
“The deficit under Harris’s plan would go about an additional 600 billion per year. I have a feeling all those plans of hers are just pipe dreams,” Antoni told Brat.
Brat doubts that the markets would support such expansive fiscal policies as Harris has projected, regardless of the administration in power. Antoni concurs, pointing out the increasing interest burden on the national debt. He mentions that interest expenses have become a top federal expenditure, surpassing nearly all budget categories except Social Security.
The International Investment Position and Debt Concerns
Antoni further warns of America’s vulnerability due to its negative international investment position, which is around minus 80% of GDP, equating to over $20 trillion. This means foreign entities own a significant portion of U.S. assets, making the country reliant on international goodwill.
“We are beholden to the kindness of strangers,” Antoni notes.
This reliance explains the urgency of addressing fiscal challenges to avoid economic turmoil.
Markets Are Reacting, Not Waiting
Brat and Antoni also highlight the behavior of financial markets. They argue that the bond market, known for its foresight, is already reacting to unsustainable U.S. fiscal policies. As Antoni notes, when the Federal Reserve cut interest rates, bond yields went up instead of down—a clear sign that investors doubt the Fed’s ability to control inflation.
“The bond market is forward-looking, and they’re not waiting until after the election to react,” Antoni warns.
Solutions: Tough Choices Ahead
Antoni lays out potential measures for reorganizing the U.S. fiscal house. These include cutting the federal workforce, increasing Social Security’s retirement age, and means-testing Medicare. However, he acknowledges that even these tough choices would only achieve a "primary balance”—stabilizing debt relative to GDP without actually reducing the total debt burden.
Brat agrees that America’s fiscal dilemma requires radical reforms, emphasizing that more tax cuts alone won’t solve the problem:
“You have to grow the economy by reducing regulation and expanding opportunities, not by continually inflating deficits,” Brat added.
Populist Approach Needed for Economic Reforms
Both Antoni and Brat advocate for a populist approach to economic reform. They argue that only a leader aligned with the interests of ordinary Americans—not Wall Street or corporate elites—can make the necessary changes. A populist movement would focus on cutting wasteful spending, ending costly bailouts, and creating a sustainable economic policy for the long term.
By addressing fiscal imbalances now, Antoni and Brat believe the U.S. can avert a crisis similar to the 2007-2008 financial collapse—a crisis that ignited today’s populist movement.
Resources:
Stephen K. Bannon Speech at Tea Party, New York City, 2010 on the 2008 Financial Crisis
More of our coverage of economics in the WarRoom:
The Anti-Manufacturing Agenda: Understanding Its Impact on American Freedom and Economy
NAVARRO: How J.D. Vance’s Experiences Helped Shape MAGA’s America First Policies
For more context from Dave Brat and EJ Antoni from Wednesday’s WarRoom:
E.J. Antoni: "The Right Solution Would Be To Massively Reduce Government Spending”
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