As he got to work on Jan. 20, President BidenJoe BidenHouse Democrat threatens to vote against party's spending bill if HBCUs don't get more federal aid Overnight Defense & National Security — The Pentagon's deadly mistake Haitians stuck in Texas extend Biden's immigration woes MORE listed among his top priorities getting the economy on track and addressing the COVID-19 pandemic. One can hardly argue with the urgency. To accomplish these goals, he proposes adding another $1.9 trillion on top of the nearly $4 trillion approved by Congress before the election. Facing tough opposition from Republicans, Biden is looking for creative ways to get support.
There is considerable debate over whether pumping out more federal spending will fix the economy. First, the main reason for the economic malaise is lockdowns imposed by the federal and state governments. A recent study correlated the extent of nationwide lockdowns with the persistence of COVID-19 growth for England, France, Germany, Iran, Italy, the Netherlands, South Korea, Spain, Sweden and the United States. South Korea and Sweden, which had less restrictive lockdowns than the others, had COVID-19 growth rates of 0.25 and 0.33, respectively, compared to an average for all 10 countries of 0.32. The researchers conclude that, “While small benefits cannot be excluded, we do not find significant benefits on case growth of more restrictive NPIs (non-pharmaceutical interventions). Similar reductions in case growth may be achievable with less restrictive interventions.”
Second, not only do stimulus checks do little to slow the pandemic, they do little to stimulate the economy devastated by lockdowns. As documented in a National Bureau of Economic Research paper, less than one-half of money from the CARES stimulus checks was spent; the rest was used to pay down existing debt or saved. This consumption behavior is consistent with previous federal government direct stimulus programs. A recent Forbes article opined that many consumption expenditures (such as for travel, dining and entertainment) cannot now be made because of government regulations. When consumers do buy things, the money goes to on-line companies such as Amazon rather than to main street merchants where lockdowns hit hardest.
Biden is seeking a gradual increase in the minimum wage to $15 per hour. He argues that with the increase "the whole economy rises." To the contrary, an NBER working paper surveys decades of economic research on the effect of minimum wages and finds “a clear preponderance of negative estimates” on the economy and stronger evidence of negative effects “for teens and young adults as well as the less educated.” In other words, a higher minimum wage will have a chilling effect on the reemployment of low wage and minority workers, who have suffered disproportionately from the pandemic.
Finally, as with any congressional spending of the stimulus package magnitudes, there is much fraud, inefficiency and pork, which effectively diverts help for COVID-19 victims or the economy. Fraudulent unemployment payments in California during the pandemic are estimated at $11 billion and could be as high as $30 billion — more than one quarter of unemployment payments issued since March 2020.
Elected officials from across the West asked for COVID-19-targeted money to acquire land and water for conservation and recreational purposes. Wyoming officials argued that “Our national, state and local parks, trails and public lands are a critical economic driver for communities …. Across the west, the travel and tourism industries have been taking a hit in the current crisis.” Of the $900 million, they urged Congress to authorize 90 percent was for land acquisition and outdoor recreation projects; the remaining 10 percent was for “other purposes” — hopefully more directly related to COVID-19 remedies.
The president could do more to restart the economy and fight COVID-19 by channeling money toward vaccinations. A Moderna vaccine dose costs an average of $34.50 and a Pfizer dose $19.50. At those prices, achieving Biden’s goal of 1.5 million vaccinations per day for 100 days would cost $3 to $5 trillion. The president’s plan, however, calls for $350 billion for vaccination programs and hiring health care workers.
A shot in the publics’ arms would do more to control the pandemic and put the economy back on track than funding more fraud and pork.
Terry L. Anderson has been a senior fellow at the Hoover Institution since 1998 and is currently the John and Jean De Nault Senior Fellow. He is the past president of the Property and Environment Research Center in Bozeman, Mont., and a professor emeritus at Montana State University.
Richard Sousa is a research fellow emeritus at the Hoover Institution and a member of the Hoover IP2 steering committee. He was the Institution’s senior associate director until 2014; simultaneously, he was director of the Hoover Institution Library and Archives from 2007 to 2012.