Congress has authorized the spending of some $4 trillion on COVID-19 relief and economic “stimulus,” but for “moderate” President Biden, even this unprecedented spending blowout isn’t enough.
He wants to push through another $1.9 trillion in spending, including partisan poison pills such as a $15 minimum wage.
Yet the actual state of the economy doesn’t support the argument that we need to blow out the budget deficit even further — not even close.
While the country is still struggling with the COVID-19 crisis, economic growth is on the rebound. In the third quarter of 2020, growth bounced back at a whopping 33.4% annualized rate. In the fourth quarter, growth continued with a 4% annualized rate. Yes, the economy shrunk overall in 2020, but that was due to the second quarter collapse. More recent growth figures are quite positive and certainly don’t suggest an economy starving for relief.
Nonetheless, the Biden administration is trying to spin these numbers to make things look bleaker and drive support for partisan stimulus legislation. “In the fourth quarter, we experienced the second-largest contraction in a calendar year on record,” top White House economist Brian Deese said.
That doesn’t make any sense.
“How can you have the largest annual contraction in a single quarter?” the Wall Street Journal editorial board wryly asks. “Deese is trying to obscure the growth in the fourth quarter by conflating it with the decline earlier in the year to justify another $1.9 trillion in spending on all and sundry Democratic policy priorities.”
Even some Democratic economic analysts are forced to admit that Biden’s spending proposals are total overkill given the state of the economy.
“[The Biden] administration can do [stimulus] far more surgically, and with a nod toward our long-term fiscal challenges,” one former Obama Treasury official wrote in the New York Times. “We don’t necessarily need (at least not now) as much stimulus as he is offering. And some of the most expensive provisions are the least well targeted to help the neediest.”
More runaway spending would come with very real costs. Continuing to blow out the debt means higher taxes and reduced economic opportunity for future generations, as well as a “crowding out” of money that could have gone to private investment but instead is taken up by government borrowing. Don’t forget that the government can’t create wealth out of thin air: Every dollar for “stimulus” has to come from somewhere else in the economy.
Moreover, if we really want to stimulate the economy, we have to roll back the lockdowns and remaining restrictions hampering many blue states, especially considering the wealth of research and real-world examples showing these restrictions are not even effective at stopping the spread of COVID-19.
A new report shows that the high face-value job losses we saw in December were actually widely variable across states. Job growth surged last month in Texas, Georgia, North Carolina, and South Carolina, per the Wall Street Journal. It further dropped in Michigan, California, and New York. Can you see the pattern yet?
The states where conservative governors are taking a more reasonable approach are driving the economic recovery. Meanwhile, hopeless blue states such as California continued to strangle their economies in December and are only now seeing some relief.
The facts here are very clear. There’s a clear pathway to stimulating the economy, but it doesn’t have to involve passing Biden’s partisan wish list or trillions more in deficit-financed spending.
Brad Polumbo (@Brad_Polumbo) is opinion editor at the Foundation for Economic Education and a Washington Examiner contributor.