economics
Bidenomics: the most irresponsible economy policy in 40 years?
University of Chicago
City University of New York
0
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Genesis
Response
Penultimate
Finale
April 19th, 2021
Is Bidenomics the most irresponsible economic policy in 40 years? Let me answer a different question: will it be worth it? I fear it will not be.
The covid-19 pandemic has caused great pain to many families and companies. The government cannot magically create goods and services that the private sector otherwise produces. But it can act to insure those who have fallen on tough times against macroeconomic shocks. And so it did, and massively so in 2020, borrowing against the future to make resources available now. The federal debt-to-GDP ratio held steady between 100 and 107 percent from 2012 to the end of 2019. It shot up to 130 percent by the end of 2020, exceeding the previous World War II record. As households and firms dig out of the disastrous 2020, many signs point to a solid recovery. The unemployment rate is now at 6 percent: not yet the 50-year record low of 3.5 percent at the end of 2019, but no longer disastrously high. Nonetheless, the Biden administration and Congress recently passed a massive 1.9 trillion dollar stimulus plan rather than measures commensurate with the nascent recovery and focusing on those most in need. The Biden administration now seeks to add another 2.3 trillion dollars of spending over the next decade. No doubt: this is massive. The two plans together cost 20 percent of GDP or more than $12,000 per person.
Some receive the popular $1,400 stimulus check, but those checks only amount to about 22 percent of the first 1.9 trillion dollars. More than 50 percent was “expansions of progressive programs, pork, and unrelated policy changes,” according to the Wall Street Journal. The next 2.3 billion will spend 27 percent on modernizing transportation infrastructure. Then, 400 billion will be spent here and 300 billion there for other items high on some wish lists. That list keeps expanding: witness the push for student debt forgiveness, a highly regressive policy benefitting those already on a path to higher income.
All that largesse will need to be repaid eventually, draining resources from better uses then. Tax increases are planned for companies, which are still on life support and struggling to return to normal. This is an odd policy if the aim is to support a vibrant recovery led by the private sector. Instead, the objective appears to be to considerably increase redistributive government programs and planning, with all the lobbying, wasteful spending, and increase in government dependency that will come with it. It is hard to believe that the parties involved will act with the desirable frugality and responsibility towards tax-payer funded resources, given these massive amounts. Yes, some dilapidated roads and bridges will thankfully get fixed. Some worthy programs will see funding. But I fear that ten years from now when the bills come due, we will be baffled how this or that could have possibly cost that much. We will wonder where all the money went. Too late. It will be gone. Irresponsible? You be the judge.
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