‘Borrow-and-spend’ stimulus bill is a fiscal monstrosity
The 5,000-page, $900 billion fiscal “stimulus” legislation passed by Congress on Monday is not a jobs bill, and it will do far more short- and long-term damage to the U.S. economy than good. Why is it that “bipartisanship” in Washington these days means that Republicans and Democrats agree to spend and borrow? Fiscal conservatives in Congress should have rejected this debt bill.
One of the worst features of the bill is the $300-a-week supplemental unemployment benefit (raised by only $25 in the 2009 recession under President Obama) which will deter work and reduce employment by as much as 3 million jobs, according to a study by University of Chicago economist Casey Mulligan. Half of all unemployed workers will receive more money in unemployment benefits and food stamps than they would earn for working. This is, in reality, an anti-employment measure.
The $600 checks — free cash! — to Americans are simply a form of “helicopter money” that redistributes income and reduces the rewards for working and producing. The tens of billions of bailout funds for airlines, theaters, the entertainment industry and other businesses force taxpayers to fund losses that should be absorbed by shareholders. The $16 billion of funds for bankrupt urban transit systems are a massive bailout to New York and other big cities, whose mayors have shuttered local businesses and restricted travel. The roads and highway construction get less than half the transportation dollars, even though cars carry ten times more passengers than 20th century bus and rail systems.
There also is a smorgasbord of spending for universities and schools ($82 billion) whose employees didn’t suffer any income losses, day care centers ($10 billion), museums, substance abuse programs, broadband funding ($7 billion), and rental assistance ($25 billion). Far more thick pieces of bacon are hidden inside the thousands of pages of fine print in this bill than we or anyone else even knows about at this point. These monstrosities will come to light long after Congress voted its approval.
Congress sure is generous when it comes to spending other people’s money.
Amazingly, this near-$1-trillion bill did not contain a single major pro-growth tax reduction or deregulation that will help spur economic growth and hiring. The one positive initiative that would create jobs — the payroll tax suspension — was rejected by Congress. Yet, this would have cost far fewer jobs, almost nothing in administrative expenses, and had a smaller impact on the national debt than this bill does.
Instead, nearly every penny of the money being spent is for low- or negative-return spending programs. This is the opposite of sound economics and completely contrary to what most Republicans, as well as a lot of Democrats, stand for.
We should have learned from the failed $800 billion Obama stimulus experiment (those famous disingenuous “shovel-ready projects”) that government spending does not increase growth or employment. The 2009 stimulus plan led to reduced employment, according to the Obama economic team’s own estimates.
The ultimate stimulus today is the coronavirus vaccine, and Congress and the White House should team together to get this drug widely and quickly distributed to Americans to reduce deaths and revive so many of our battered businesses. That’s where government spending does make a major contribution.
The U.S. economy had been experiencing the most rapid recovery from a recession in modern times. Twelve million jobs were recovered in just six months, and American wages and salaries have recovered 99 percent of their previous high from the beginning of the year. The unemployment rate was expected to be 10 percent to 12 percent, according to most of the leading economic experts in Washington and on Wall Street; instead, unemployment has fallen to 6.7 percent.
The economy grew by an all-time record high of 33 percent in the third quarter of the year and is on a pace for somewhat less, but still strong, growth in the fourth quarter, according to the latest projection from the Federal Reserve Bank of Atlanta.
This super-V-shaped recovery has happened even without the $2 trillion spending stimulus bill that House Speaker Nancy Pelosi (D-Calif.) and many economists in Washington mistakenly insisted was necessary to keep the economy from crashing. In most red states, unemployment is now less than 6 percent, and in some states, like Nebraska and Utah, unemployment is below 4 percent. These red states have almost all balanced their budgets and retained tax revenue growth. They don’t need help from Washington.
Unemployment rates are stubbornly high and budget deficits have soared in blue-state America with governors who like lockdowns and mayors who continue to order draconian shutdowns of businesses, schools and restaurants. The spread of the virus is truly dangerous — but not to everyone. We know who is most at risk and, more importantly, they themselves know. Closing the economy, schools and all else has proven, time and time again, to be an ineffective, costly strategy — and until those lockdowns end, no amount of federal spending will undo the damage.
Arthur Laffer is an economist and president of Laffer Associates. An economic adviser to Presidents Reagan and Trump, he received the Presidential Medal of Freedom in 2019. Stephen Moore is a senior fellow at FreedomWorks and an economic adviser to the Trump campaign and White House. Together, they are co-founders of the Committee to Unleash Prosperity and co-authors of “Trumponomics: Inside the America First Plan to Revive Our Economy.”