I do not often agree with liberal political economist Paul Krugman of The New York Times.
But his op-ed that was published in the March 12 LNP | LancasterOnline with the headline “Will stagnation follow the Biden boom?” surprised me with the statement: “There’s a growing consensus among economists that the U.S. economy spent most of the decade after the 2008 financial crisis producing less and employing fewer people than it should have.”
Why did it take so long for Krugman to come to this conclusion? This has been conventional wisdom for years. Obama/Biden policy crippled potential economic growth by constantly threatening higher business taxes and more costly and time-wasting regulations.
Mostly forgotten in the rush toward President Joe Biden’s latest spending spree is the fact that before the pandemic, former President Donald Trump was on “full speed ahead” with record-breaking low unemployment rates. Minority employment rates were at an all-time high.
And, just as important, Trump’s economic plan had reduced inequality by pushing up wages for lower-paying jobs faster than high paying jobs. (See my Oct. 18, 2020, Sunday LNP | LancasterOnline op-ed, “Trump has 2 opponents: Biden and national media.”) Low tax rates, the reduction of regulations and eliminating threats to add costs to businesses created the environment for this incredible Trump economic success.
You would have expected that knowing how Trump created such a great economy would serve as the blueprint for Biden and his economic team.
But, noooooo! President Biden introduced the American Rescue Plan to provide an immediate financial boost to almost all Americans and greatly increase cash benefits for low-income persons, families and the unemployed.
Also included in the legislation is financial support for states and local governments. So, instead of expanding employment possibilities, Biden has vastly expanded programs to reduce the incentive for capable individuals to work — and he even pays some unemployed workers more than the wages in their former job. Totally absent was support for any long-term, self-sustaining economic expansion.
How was the American Rescue Plan sold to the public? The answer is simple — just promote the giveaways. Ask the question, “Would you like a gift of $1,400 for each adult taxpayer in your family earning less than $75,000? What if there were also generous supplements for your child dependents? And how about adding some additional cash for the kids’ day care and overpaying lost wages of unemployed former workers?”
It’s essentially this: “There is much more we want to give away, but the details would take your attention and focus away from these big family giveaways. So let’s do a survey with this limited information to find out what the public thinks.”
The response: almost unanimous support for the giveaways, though some did ask, “How do we pay for it?”
The answer, essentially: “We know the names and addresses of your kids, your grandkids and your great-grandkids. No worry. We will just dump the problem on them. Before the problem really hits, we will be gone.”
Yes, this is reality. This really happened. The $1.9 trillion American Rescue Plan was passed by Congress and signed by President Biden.
For most of us, the cash is already in the bank. But, that was not all of reality. There was much more in this legislation. This is what President Biden, his leftist army and the Democrats are doing to America. This is happening despite many believing that our nation is on the verge of an economic explosion without these broad-based handouts. Yes, some targeted support — particularly for small businesses — was needed, but the massive infusion of the American Rescue Plan was and is unnecessary.
Half of the $1.9 trillion would have been sufficient if used in conjunction with the unused funds in the COVID-19 relief bills passed in 2020. That approach would have led to $1 trillion less being added to our already bloated national debt. This would have been a great savings for future generations.
Yes, massive national debt is dangerous. In the past, wartime has been the only consistent excuse for large debts. However, since 2008, we seem to have completely overlooked the dangers of deficit spending and a dependence on China, other countries and low interest rates for our profligate spending.
For example, eight years of President Barack Obama and three years of Trump yielded an average of over $800 billion of deficit spending every year after 2008 and before the impact of COVID-19. This means that both parties did little, if anything, to rein in the everyday expenditures of the federal government. That is history, but the problem has not gone away.
The problem facing us now is the unbelievable deficit burden incorporated into President Biden’s additional proposals, which continue to grow in cost as the far-left liberals in the Democratic Party seem to have taken charge of the party’s legislative and spending agenda. Their liberal agenda requires the expenditure of multiple trillions of dollars we do not have. This accompanies proposals to significantly raise taxes, as well, particularly on businesses (the inappropriately named American Jobs Plan).
Rather than replicate the Trump administration’s successful approach to stimulating the economy, Biden wants to revamp support programs for families and children and — at the same time — ramp up unemployment support to levels that I believe discourage employment.
Why work when you can make more staying home? This is a major drag on our entire economic system. I worry that this creates a permanent dependence on government welfare largess and ignores the long-term need to build families linked to and supported by gainful employment.
And, obviously, unknown to the leaders of the Democratic welfare build-up, individuals and families do not build wealth when on the government dole. Employment is the source of wealth creation, through savings and employment-related retirement programs.
The Democrats seem to be relegating millions of individuals and families to a lifetime of waiting for the next government check, rental subsidy and refill on the “food stamps” card.
Stuart Wesbury, a professor emeritus in Arizona State University’s School of Health Administration and Policy, is a resident of Willow Street. He has a Ph.D. in economics and business administration. He is a former community member of the LNP | LancasterOnline Editorial Board.