Economy and Business Politics and Public Policy

Time to Rethink Trillions

Mitch Albom is a thoughtful author and columnist. Recently he wrote this piece for the Detroit Free Press: “Mitch Albom: A trillion dollars is not a billion; why you can’t just print money”. In the article he lays out how spending at the rate we are on large social programs will have a cost, a very large cost.

In the article he explains how politicians are as Rahm Emanual said (para-phrased): “not letting a good crisis go to waste”. I don’t think that Mitch Albom is a partisan individual and don’t think he is favoring one party over another in his analysis of what is historically massive spending on huge government spending plans. The CARES act last year amounted to $2 trillion and was sorely needed but adding on the nearly $2 trillion “American Rescue Plan” last month, followed by a proposal for a $2.3 trillion infrastructure bill described as “The American Jobs Plan” with an advertised $2 trillion “American Family Plan” (soon to be proposed) seems to be incredibly excessive. 

Mr. Albom points out the inevitable devaluation of the US dollar that will result with such an infusion of capital into the economy, and inevitable inflation that will ensue and reminds that this hurts all of us in the long run. Besides higher taxes that always end up hitting the middle class, these programs don’t promote economic growth as they are purported to, and eventually become economic anchors as everyday Americans end up paying more and more of their income to the government which redistributes it unevenly in a way that does not benefit everyone. 

The important points that Mr. Albom makes include that the American Rescue Plan (in Joe Biden’s words) is aimed at “the very health of our nation” with the sales pitch being that it addresses the Covid-19 pandemic. The truth is that (again as Mr. Albom points out) the bill includes more money ($350 billion) for state and local government assistance than it does for direct aid related to Covid-19 vaccinations. Spending on state and local governments that have badly mismanaged pension systems is not directly related to health initiatives. It seems more targeted at helping governments with mostly leaders from the democratic party. This may help ensure democratic electoral success in future elections. This does not seem like wise spending to address “the very health of our nation”.

With the American Jobs Plan (infrastructure) items include $1.5 billion for Amtrak, and hundreds of millions for museums, Native American language preservation, and underground transit in Silicon Valley (a known earthquake zone by the way). The Amtrak expenditure is infrastructure related, but museums, language preservation initiatives, etc. may be lofty goals, but don’t seem to belong in an infrastructure bill. Spending on these types of programs may be aspirational for a minority of the American people, but it does not seem like wise spending in the context of a bill intended to address infrastructure issues.

The infrastructure plan includes more spending on programs to encourage the use of electric vehicles ($174 billion) than on actual construction of roads and bridges. Personally, I am a proponent of electric cars, but this is really an item for combatting climate change rather than something that belongs in an infrastructure bill. Going beyond this, another layer of audacity seems to be the inclusion of $400 billion in spending on senior and disabled person care, affordable housing ($300 billion) and another $35 billion for researching climate change. These are all worthy notions but packaging them into an “infrastructure bill” and selling them on that basis is dishonest. It will eventually lead to more political division as the debt burden will mount on ordinary citizens due to the cost of the programs (which may have no clear tangible benefit).

President Biden is probably a well-meaning and decent man. He has only lived in his adult life as a lawmaker in Washington and does not understand what life is like in the country as a whole. He has no idea how to run a business, meet a payroll, or build an economic entity (a business). He is a politician who believes in big government and wants to preserve power for his party, the Democratic Party. As we have seen over time, the party in power (democrats in this case) always overreach and push too liberal an agenda. In general, all politicians do this by pushing too liberal or too conservative an agenda (depending on who is in power). In this case, Biden is falling into the trap of assuming a mandate that does not really exist. It will lead to more political division within the country.

The Biden administration and the Democratic legislature is pushing a very liberal agenda and acts as if it has a huge mandate. The last election for the house and senate was not a sweeping mandate. The election results not related to our past President were not totally liberal (many voted against President Trump because they wanted a more reasoned and polished approach to government than his administration had provided). Many voting against Trump were not particularly liberal in their views at all. The election as a result did not produce a “Blue Wave” as many in the press and Washington seem to believe. The house of representatives lost seats to the republicans and if our past President had not been so hyperbolic and erratic toward the senatorial runoff elections in Georgia and had not pushed his “stolen election” narrative, the Senate may still be in Republican hands.

 In actual fact the country as a whole is not as liberal as the major east and west coast cities. The large spending and dishonesty over what the infrastructure bills contain will cause a backlash against the Democratic party. Our prior President was such a polarizing figure that it is easy to feel more comfortable with a President who is acting more “presidential” than the prior one. President Biden is much more gentlemanly and behaves in a more “presidential” way than Trump ever did. The mistake that President Biden is making is not just assuming that he has more of a mandate than he does, but also under-estimating the backlash that he is forming within the electorate. If Trump stays off the stage in 2022 then the Republicans are very likely to regain the house and the senate if this liberal agenda continues.

When the tax hikes that President Biden articulated in his campaign rhetoric are proposed, the illusion of a mandate will quickly evaporate. The citizens now are happy to receive checks, get extended unemployment assistance, and other promised government benefits. When the tax bill comes due on ordinary Americans (as it always does and no matter what Biden says it will fall on the middle class) then the electorate will no longer support the wild spending in Washington. The democratic party leadership will have overstepped its bounds and the political tables will likely turn. Biden would be wise to control members of his party who have such an aggressive agenda. Coming out of the “pandemic economy” the country and electorate need time to heal. President Biden is nearly inviting a backlash election that opens the electorate back up to “Trumpian” politics.

So it would seem prudent for President Biden to be mindful that pushing his policies of “trillions and trillions” of spending on an electorate that really does not overwhelmingly support that kind of spending is likely to be a losing proposition in the long run. It will also sadly push an enormous debt burden onto the American people for generations to come. This will inevitably reduce the quality of life here in the long run and sow the seeds of political strife in the short run.