The Government Lost 36% of Your Money Last Year

In a 2022 interview, then-Transportation Secretary Pete Buttigieg discussed how we was going to spend $1.2 trillion of taxpayer money from the recently passed infrastructure bill.

“The main thing I’m thinking about,” he said, “is how do we make sure we take all this money— you know it’s $1.2 trillion— and actually deliver $1.2 trillion dollars worth of value. . .”

That whole way of thinking is just astonishing.

If you invest $1 million in a business, you’re obviously going to expect that the CEO will deliver a lot more than $1 million in value from that investment. In fact a good executive will be able to turn a $1 million investment into tens or hundreds of millions of dollars in value.

But a couple years ago, when he was still Transportation Secretary, Pete encapsulated the government’s approach to investing. They’re not looking to get a 100x, 10x, or even 2x return.

To them, it’s quite an accomplishment to simply get X, i.e. to spend $1 trillion dollars efficiently enough to simply see $1 trillion of value.

If Pete had been a private sector investment manager, he would have been fired that very day.

I bring this up because the Commerce Department released fourth quarter GDP numbers yesterday, and their report showed that the US economy grew in “real terms” by 2.8% in 2024.

2.8% “real” GDP growth essentially means that the US economy produced 2.8% more goods and services in 2024 than it did in 2023. It strips out any impact of inflation.

But remember— America’s population grows by about 1% per year. And those are just the people in the country legally. If you include the folks who waltz across the southern border illegally, then the total population growth rate is easily 2% or more.

Population growth matters here because a higher population drives more investment, more consumption, and more production of goods and services. In other words, higher population equals higher economic growth.

So, relative to population growth, a mere 2.8% increase in GDP is actually pretty pathetic, especially for the world’s most advanced, innovative, diversified economy.

“Experts” have managed to convince people that 3% real growth is some kind of huge success story. In actuality, it’s a joke.

With such extraordinary benefits at their disposal— America’s abundant energy resources, its talent pool, its world-leading technology, its deep capital markets— the US should easily grow by 5% each year.

That the US economy couldn’t even reach 3% growth is proof of how badly the government screws up the economy and restrains its potential.

On that note, the Commerce Department further reported that the size of the US economy is now $29.7 trillion— an increase of $1.4 trillion in 2024. The national debt, however, increased by $2.2 trillion in 2024.

So let’s go back to Pete Buttigieg— who couldn’t manage to invest $1 trillion while delivering at least $1 trillion in value.

By increasing the debt, the federal government essentially “invested” an extra $2.2 trillion in the US economy last year.

At a minimum, $2.2 trillion in extra government spending should have at least generated $2.2 trillion in additional economic activity. But instead the economy only grew by $1.4 trillion.

In other words, the government lost $800 billion of its $2.2 trillion investment— a loss of 36%.

Year in and year out these bureaucrats prove that they are terrible investment managers; if you give them a dollar, they’ll waste 36 cents of it. And the more you give them, the more they’ll waste.

The irony is that these are supposed to be easy, safe, ‘no-brainer’ investments… like infrastructure. It’s not like the government is investing in start-ups or some high risk moonshot venture.

They’re literally supposed to be spending tax dollars into the US economy… and they can’t even get that right.

We’ve talked about the consequences many, many times: if this trend continues, government debt will soon spiral out of control, prompting a nasty, long-term bout of inflation. Plus the dollar will likely lose its status as the global reserve currency, compounding the problem even more.

That outcome is still not a forgone conclusion. But it’s obvious that the key here is to cut spending. Dramatically. Again, the more money the government has to spend, the more they flush down the Black Hole of Waste.

It seems like the new administration is sincere about making deep spending cuts. And I truly hope they pull it off.

But in case they are not successful… it still makes so much sense to have a Plan B. And a big part of that is thinking about the potential challenges of inflation, and the loss of the dollar’s reserve status.

In our view, that means giving serious consideration to real assets.

And as we’ve talked about before, some of those real assets are as cheap as they’ve ever been right now. More on this next week.

To your freedom,