No surprises here

The Journal yesterday came out with a story about how ancillary costs of homeownership (insurance, maintenance, taxes) have been rising along with mortgages. I also saw in the Economist not long ago -- in a story about the acceleration of the melting of Antarctica -- that the Army Corps of Engineers are projecting that the cost to build a megadyke near Galveston will be $57 billion, mostly to protect the petrochemical industry around Houston which keeps getting pummeled by storms. That's the initial projection. For comparison's sake, the 2022 CHIPS Act authorized $39 billion to support development of domestic leading-edge microchip manufacturing.

A big driver here is climate change, no question -- hurricanes, fires, etc. driving up insurance premiums. If government won't price the risk, the insurance industry will. But there are also a labor supply questions as well as a monetary supply ones. Lack of labor drives up construction costs (we could let more immigration happen). Excess liquidity feeds inflation, making it harder for local governments to hire, so they have to raise taxes to pay up to staff up.

Again, we could have addressed macro monetary issue after the pandemic-driven rapid expansion of monetary supply by raising taxes, but everybody was like: "that's my money you're trying to take", despite the fact that the money hadn't existed until the government printed it. Inflation is a tax by other means.

But the government does need to look at expenditures too. We cannot cut back on military spending now with Russia and China driving so much of the world towards autocracy. If we believe in anything, if WWII was fought for anything, we need to maintain our strength while also driving our allies to do the same. Discretionary government spending aside from defense barely moves the needle, but some sacrifices will need to be made on a pro forma basis. Entitlements are the only meaningful lever we have to pull, so we need to pull it.