Is There Any Hope For Staving Off The Next "Stimulus"?
/Of all President Biden’s potential legislative initiatives, the first up in Congress is the latest round of so-called “stimulus” — some $1.9 trillion to be borrowed by the government and promptly wasted. Somehow, we are supposed to believe that this is a good idea. Over at CNN, they call it the “rescue package,” as if the economy is failing, and the only possible route to salvation is borrowing and then immediately wasting this vast sum.
It goes without saying that all the grandees of the left support the plan. After all, these people have gone to the fanciest schools and have the fanciest advanced degrees. They are the “experts,” to whom we must all defer. For example, there was Paul Krugman (Ph.D. in economics, MIT 1977) on PBS on January 18:
[T]his is a time to spend a lot of money on keeping people, keeping governments, keeping businesses whole, until the pandemic is under control.
Or incoming Treasury Secretary Janet Yellen (Ph.D. in economics, Yale 1971) today:
The U.S. labor market is stalling and in a “deep hole” that could take years to escape if lawmakers do not quickly pass an aid package that gives workers a bridge to the end of the pandemic, Treasury Secretary Janet L. Yellen warned.
Nothing illustrates the foolishness and ignorance of our so-called “experts” better than this “stimulus” bill.
In case you haven’t noticed previously, the essential requirement for earning these super-fancy Ph.D.s is the abandonment of any and all traces of common sense. Common sense would immediately tell you that if you have a lot of money you are free to go ahead and waste it; but it can’t possibly be a good idea to borrow money and then waste it. Once the money is wasted, you have nothing to show for it, and then you have to pay it back. Yes, but Krugman, Yellen, CNN, the New York Times, Biden, et al., are so much smarter than that.
Let’s take a look at some of the items in the so-called “stimulus”:
$350 billion in aid for “state, local and territorial governments.” This item is best known as the “blue state bailout.” Long before the pandemic, the bluest states — like New York, New Jersey, Connecticut, Illinois and California — got deep into a fiscal hole by rampant overspending, most notably paying off union supporters through unaffordable pension promises. When the pandemic hit, these same states led the charge of aggressive responses in the form of economic restrictions and lockdowns. As a result, all of these states have gigantic budget holes, while, over on the pandemic front, they have nothing at all to show for their lockdowns. (Indeed, despite aggressive lockdowns continuing today, New Jersey and New York lead the country in coronavirus deaths per million.). Meanwhile, red states like Texas, Florida, South Dakota and Nebraska have minimal economic restrictions, healthy budgets, and healthy economies. So now, with the Democrats in control in Washington, the feds are going to take from the red states and give to the blue to bail out their pension disasters and cover their self-inflicted budget holes. Really, Georgia, could you not have realized that this is what you were voting for?
$170 billion for “K-12 schools, colleges and universities.” For comparison, the entire budget of the federal Department of Education for the 2020 fiscal year was $72.7 billion. The education industry is the number one supporter of the Democratic Party, and has gone completely off the rails in the thrall of Critical Race Theory and America-hating and self-loathing mania. On top of that, most of the education industry has been closed to in-person instruction for about a year, heartlessly leaving poor and minority kids to fall by the wayside. So this is their reward. This $170 billion is the most disgusting payoff to political supporters for nothing that I can even imagine.
About $300 billion for the $1400 checks for everybody. It is beyond me how anyone can convince themselves that it makes sense to have the government borrow money and hand out checks to essentially everybody. And how did they come up with the $1400 figure? If $1400 is a good idea, wouldn’t $5000 be even better? How about $1 million per person? We’ll all be rich! Although there are cutoffs for high income people (thankfully, I’m not getting a handout), there also are no criteria of genuine need. Tens of millions of people who have suffered no loss and are continuing to work for full pay are getting the check. Krugman seems to think that it makes sense because the feds can borrow at very low rates right now; but of course, there is no plan to repay the bonds, and eventually they will be rolled over at whatever rates prevail at that time. I’m old enough to remember when even short-term Treasuries yielded about 15% in the early 1980s.
And those are just a few of the highlights. The $1.9 trillion is about 10% of current GDP, to be added to the national debt and apparently then carried forever.
You would think that before going this route we might look around at various countries of the world and see if massive deficit spending like this makes for more versus less economic success. If we tried looking at Europe, we would quickly find that relatively careful spenders like Germany and the Netherlands consistently out-perform economically the spendthrifts that run the biggest deficits, like Italy and Greece. Or consider a couple of other notable examples:
Japan. I had a post on the subject of fiscal “stimulus” and Japan back in August 2014. Japan is the poster child for the failure of massive “stimulus” spending to cure economic stagnation. Japan has engaged in round after round of “stimulus” spending ever since its economy first had a big nosedive back in the 1990s, and it has experienced nothing but economic stagnation as a result. As noted in that 2014 post, Japan began a particularly gigantic round of “stimulus” in 2013, and then suffered a 6.8% decline in GDP in the second quarter of 2014. Per the Trading Economics site here, Japan’s economy today is no bigger than it was in 1995. Japan’s national debt is well over 200% of GDP. It may never be able to get out of its hole.
Puerto Rico. Within the United States, we have Puerto Rico to teach us how government spending cannot bring about economic success. I had a post about Puerto Rico back in April 2014. Excerpt: “[I]n Puerto Rico they have tried and tried for decades to buy a growing economy with more and more government spending, and the result is vast dependency and a per capita income level only about half that of the otherwise lowest state (Mississippi). By 2008 Puerto Rico's government was running an official on-budget annual deficit of $3.3 billion, 44% of revenues. . . . But surely all this deficit-spending "stimulus" has created lots of jobs through the famous "multiplier" effect? Not really. [Relevant economic statistics include:] 15.2% unemployment; 30% of employed people work for the government; and 51% of residents receive some form of welfare.” In 2017 Puerto Rico filed for a special form of bankruptcy under a federal statute called PROMESA. That proceeding continues today.
Incredibly, this “stimulus” is only item 1 of multiple rounds of blowout deficit spending that our completely incompetent new administration and Congress are planning for us. Next up: the “Green New Deal”?