Deficit spending acts as a hidden tax via inflation. This tax disproportionately harms those without assets while benefiting the small percentage of the population owning assets like stocks and real estate. Therefore, supporting deficit spending is an active choice to make the rich richer and the poor poorer.

To fund deficits, the government prints money, causing inflation that devalues cash and wages. This acts as a hidden tax on the poor and middle class. Meanwhile, the wealthy, who own assets like stocks and real estate that appreciate with inflation, are protected and see their wealth grow, widening the economic divide.

Regardless of the national deficit, expect more fiscal stimulus as politicians prioritize winning elections. The need to address voter concerns about 'affordability' ahead of midterms will drive spending, creating a 'run it hot' environment favorable to hard assets.

While AI drove 2025 CapEx, a broader business investment recovery depends on a cyclical upswing in demand. This requires consumer spending to broaden beyond the wealthy, directly linking corporate investment growth to the improved financial health and real income growth of low- and middle-income households.

Large, ongoing fiscal deficits are now the primary driver of the U.S. economy, a factor many macro analysts are missing. This sustained government spending creates a higher floor for economic activity and asset prices, rendering traditional monetary policy indicators less effective and making the economy behave more like a fiscally dominant state.

A common question is "who will buy all the debt?" The answer is that money borrowed and spent by a company on a project becomes income and then savings for others. These new savings are then used to buy the debt, completing a self-funding circular flow.

The administration's policies, including tariffs and deregulation, form a cohesive strategy to spark nominal growth. This supply-side approach is considered the only politically and economically feasible way to manage the massive national debt burden built over decades, avoiding direct spending cuts.

The US economy is seeing a rare combination of high government deficits, massive AI-driven corporate investment, and bank deregulation. If the Federal Reserve also cuts rates based on labor market fears, this confluence of fiscal, corporate, and monetary stimulus could ignite unprecedented corporate risk-taking if growth holds up.

According to the Kalecki-Levy equation, gross investment spending immediately becomes revenue for another company. Unlike consumption-driven revenue which has immediate wage costs, the cost of investment (depreciation) is recognized slowly over time, creating a powerful, immediate boost to aggregate corporate profits.