Welcome back! We saw bitcoin surge even higher after yesterday’s newsletter, reaching ~$112,000 just a little while ago.

Another headline is Trump’s tax and spending bill, which the House narrowly passed this morning. Thursday means Felix is sharing his take — and he has plenty to say about the impact that legislation would have (complete with memes and charts).

Casey and Ben return tomorrow, but for now let’s get into it:

Run it hot

I’m old enough to remember when, just a few months ago, the Trump administration talked about cutting deficits to 3% of GDP.

Ever since the Liberation Day pivot, however, the Trump administration has 180’d on its goals and is now pushing a new way to manage the US debt situation: Run it hot. 

Often times, the zeitgeist of a moment can easily be encapsulated by a meme:

Last week, Treasury Secretary Scott Bessent hinted at this pivot in a CNN interview:

Read between the lines of Bessent’s quote and you realize the implications for owners of US Treasurys. 

Luke Gromen said it best:

This is financial repression in action: Grow the way out of an elevated debt/GDP ratio by making bonds yield less than the growth rate of the economy.

For example, if bond yields remain fixed at 4% but the economy grows at 6% nominally, you can outgrow the debt since the yield is fixed and will become less of a burden over time as higher revenues make it less burdensome. 

I'm sympathetic to the idea Bessent articulated during the interview: The White House wants to cut spending and increase revenues. However, squaring that idea with the House tax and spending bill, just passed overnight — it doesn’t quite pass the sniff test. 

The new bill would increase deficits by nearly $3 trillion over the next 10 years:

Breaking down the calculus, a significant amount of the bill’s spending will need to be funded by higher debt issuance:

To play devil’s advocate, the scoring and measurement of this bill is fraught with inconsistencies that should be acknowledged: 

1. It doesn’t account for increasing tariff revenues to partially offset this bill. An effective tariff rate of 15%, which is roughly where things stand today, would bring in $300-$400 billion a year. This would help partially offset the widening deficit, but not entirely, and this revenue certainly wouldn’t be the golden goose that the Trump administration hoped it would be so as to narrow the deficit to pre-Biden levels. 

2. The scoring in the bill assumes a quick expiration of Trump’s first-term tax cuts that then get reinstated afterward, leading to a superficial surge in tax cuts despite them being net-neutral. 

Semantics aside, it's clear that policy goals have shifted from one of austerity (remember DOGE?) to one that involves running the economy hot to outpace debt growth. 

This strategy is nothing new. In fact, it's more in line with the US government’s approach from 2021 onwards.

In the great words of Lyn Alden: Nothing stops this train.

— Felix Jauvin

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• Initial jobless claims for the week ended May 17 came in at 227,000, slightly below analyst projections. This also marks a four-week low for first-time filers. 

• President Trump’s memecoin dinner is scheduled for tonight at the Trump National Golf Club outside of DC. The top 220 holders of $TRUMP were invited to attend. 

• During a week when bitcoin hit a new high and Jamie Dimon said JPMorgan Chase would let its clients buy bitcoin, Ben took a deeper look at Vanguard’s resistance to crypto and what it’ll take for the fund giant to jump in.