The Unnecessary Stimulus
In January, President Biden presented his $1.9 trillion spending package as an emergency measure to address a continuing public-health crisis. Now, as the bill heads to a vote in the House, more than 65 million Americans have been vaccinated, with new cases of COVID-19 on a steady decline. In the meantime, consumer spending and business investment have jumped while jobless claims have decreased.
For a party ostensibly committed to “following the science,” the Democrats are surprisingly willing to ignore the data and act as if it is still March of 2020.
Yet even if the economic outlook were as negative as the Democrats claim, Biden’s proposal would do little to improve it. More than one third of the so-called stimulus won’t be spent until 2022 or later. Public-education grants are expected to last until 2028, even as teachers’ unions refuse to reopen schools. That’s partially because $113 billion in education aid from the last relief bill remains unspent.
So too with $370 billion in state and local assistance, the lion’s share of which would sit unused until 2023. With some exceptions, state and local budgets are in good shape. The Committee for a Responsible Budget finds that state and local tax receipts grew by 10 percent in 2020. What the Democrats position as emergency relief is in fact a bailout of profligate public-pension plans and mismanaged blue states.
The money that will be spent this year — on checks to households and unemployment top-ups — is wasteful at best and contractionary at worst. Thanks to last year’s CARES Act, personal incomes are higher now than they were before the pandemic. Most Americans used the first round of checks to pad out their savings accounts and pay down debt. The second round, delivered in December, contributed to the highest bump in retail spending since 2009.
A deficit-funded subsidy to consumers might be a boon to economic growth if Americans went back to work, but the Biden administration is committed to making unemployment as attractive as possible. The proposed $400 unemployment top-ups, extended until September, would leave 60 percent of benefit recipients making more off-the-job than on-the-job. Not to mention Biden’s proposed federal minimum wage of $15, which would kill 1.4 million jobs according to the Congressional Budget Office.
Recent shortages of everything from lumber to computer chips show that supply remains a bigger issue than demand. No amount of consumer spending can stimulate an economy in which businesses are unable to produce goods and services. Not only does the Biden bill ignore these issues, but it exacerbates them by incentivizing the unemployed to stay home.
Elsewhere, the bill’s expanded Obamacare subsidies — a backdoor attempt to improve some of the many disappointing results of Obamacare — would raise prices for most Americans and increase the already astronomical sums of money spent on health care in the U.S. As with most of Biden’s proposal, it does not belong in an emergency-relief bill.
The pandemic is not yet over, and the economy remains fragile. Legislation that accelerated vaccinations and positioned businesses to reopen as quickly as possible would be welcome. The Biden stimulus is not that.
