Tag Archives: stimulus package

Inflation Isn’t Over, And The Damage Will Continue

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No one who has bought groceries recently or filled up their gas tank believes inflation is over. Yet recently economist Paul Krugman declared, “Inflation is over. We won.” I guess he doesn’t do the grocery shopping in his family. Yes, inflation has slowed. However, we are still dealing with the price increases that occurred in the past three years. If the baseline is where we were when President Biden took office, the inflation rate is somewhere over 15 percent. If we are talking about the past few months, the number is much lower. However, that number is in addition to the 15 percent that we have already been dealing with.

On Saturday, Real Clear Politics posted a commentary about the damage the Biden administration has done to the economy.

The commentary notes:

The truth is that the wild inflation, high interest rates, bank failures, and other economic harms of the last three years were all entirely avoidable and all entirely caused by President Biden and the Democrats’ arrogant and unwise policies.

This is not “Monday morning quarterbacking.” Some of us were saying this well before the fact. My May 7, 2021 column (“Joe Biden, Economy Killer”) accurately forecast the inflation, rising interest rates, and rising government debt service long before the Biden administration even acknowledged the risks were real.

The U.S. economy did not need another giant stimulus plan when Biden and the Democrats took control in 2021. The U.S. gross domestic product, knocked down by the COVID shutdown in the first half of 2020, had jumped up by a record 33% in the third quarter of 2020 and by another 4% in the fourth quarter, all before Biden took office. The S&P stock market had risen 16.3% in 2020. Employers were waiting for workers to come back to work, and another stimulus package had been passed with bipartisan support in the last quarter of 2020. Happily, the inflation rate was only 1.4% as 2020 ended, with a one-year Treasury rate of just 0.10% and a 10-year Treasury rate of just 0.95%

The commentary concludes:

The Congressional Budget Office last week revised its government deficit estimates upward, expecting $48.3 trillion of government debt by 2034. Interest expense on the federal debt this year has already jumped up to $870 billion, which is larger than the defense budget. Additionally, Biden’s higher interest rates will continue to increase debt service costs as old government debt rolls off and is replaced at higher costs. The risk is stark: a 3% higher interest rate on even the existing $33 trillion level of federal debt equates to $1 trillion of extra federal interest expense each and every year, on top of the already giant existing debt service number.

There is no painless way to pay down this deficit or cover this extra annual government interest cost. The need for billions and billions of extra tax money or budget cuts will fuel fierce political fights, populist divisions, and national anger for years to come. All this public unrest will also be the legacy of the bad Democratic economic policies since 2021. Professor Krugman, when it comes to Bidenomics, “We lost.”

I believe we can turn this around, but it will take an administration that includes people who have worked in the private sector and run businesses. Whatever administration is elected in November needs to include people hired for their qualifications and experience–not for any other reason.

What’s Good For The Goose…

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Townhall posted a very interesting article today about the possibility of a government shutdown.

The article notes:

In late September, Congress passed a bill to keep the government funded at current levels through this Friday. Trump has refused to sign the comprehensive funding bill tied to providing new $600 stimulus checks to qualifying Americans. It’s clear that they don’t have much time to resolve their disagreements and pass a law President Trump will support.

Most likely, they will pass another extension, but Trump has already signaled he would rather use a pocket veto and let the next president handle the issue than sign a bill he can’t support. Such a standoff risks a government shutdown if a solution cannot be passed and signed.

President Trump has had three shutdowns in his term as president, the longest being 35 days between December 2018 and January 2019 over the issue of funding for the border wall. That shutdown forced about 800,000 federal government workers to go on furlough without pay. If an extension is not passed to avoid a shutdown, thousands of government workers considered nonessential would again be furloughed or forced to work without pay until the shutdown ends.

Government leaders love to say how they experience our pain for the lockdowns generated in many Democrat controlled states and cities during the COVID Pandemic restrictions. Many Americans have lost jobs; some have lost their businesses. Government workers can talk as though they understand, but they’ve had no cuts in salary or their retirement plans. They have been insulated from the consequences of their own actions.

While small business and their employees have been suffering, big box stores and Amazon have seen large profits. While your neighborhood restaurants and bars have been closed, many larger restaurants with more physical space have managed to remain open at partial capacity. The impact of the shutdowns has been very uneven, with small businesses and their owners being hit the hardest. Meanwhile, Congress and federal employees have continued to receive full paychecks. The people who made the decision to shut down have generally not suffered the consequences of that decision. Seems a little unfair.

The article concludes:

Currently, government workers have no skin in the game. There is no shared sacrifice. When any shutdown furlough ends, they’re usually paid retroactively for what income they lost. What do our citizens get for having their businesses closed and their jobs lost—$600 or maybe $1,200. Citizens will get crumbs and the promise of higher taxes.

President Trump came to Washington to take on the swamp. It put up more of a fight than expected. In fact, if the results of this election stand, the swamp will have won. The Biden administration has no plan to cut back the size of government. No, his plan is to feed the beast and free it to take control of more of your life.

Could we shut down government for two years until the mid-term elections? Unfortunately, probably not.

It’s time for the President to just say no to the ridiculous pork in the spending bill and send more money to the people who have actually been hurt by the shutdowns.

Is This Really A Good Idea?

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Yesterday The New York Post posted an article about a recent statement by New York City Mayor Bill de Blasio about one of the things that will happen if Joe Biden is elected President.

The article reports:

Mayor Bill de Blasio is hoping a federal stimulus package akin to FDR’s New Deal will help curtail crime in the Big Apple, he said Monday.

Speaking to NY1’s Errol Louis, Hizzoner said if Joe Biden is elected president, New Yorkers should expect a stimulus deal that will help get the city “back on its feet” and combat a spike in murders, shootings and burglaries.

“If Joe Biden’s elected president, the most likely time for a major stimulus is February, and I’m thinking along the lines of the New Deal, and he’s obviously talking about emulating FDR,” the mayor said.

“The second we have that, New York City’s in a position to address a whole host of issues, avert layoffs, but also to do a lot of positive things,” he added.

The mayor also said a coronavirus vaccine that is expected in a matter of months will help reboot the city’s economy — and drive crime down.

Let me do a little translating here. What the Mayor is looking for is a stimulus package that will undo the bad fiscal management that has plagued New York City for some time. One of the reasons the stimulus package has not passed is that the Democrats in the House of Representatives want to use the stimulus to bail out Democrat-controlled cities that have huge budget deficits. The Republicans in the Senate want to use the stimulus bill to help businesses and their employees get back on their feet. It should be noted that in a well run city, getting businesses and employees back on their feet will increase tax revenue; and if the city is run well, help deal with any budget deficit. We have a number of cities in America that need to get their spending under control. A federal bailout will not help curb their excessive spending and should not happen.

I Totally Agree

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Yesterday the U.K Daily Mail posted an article about some recent comments by Senate Majority Leader Mitch McConnell. The Senator made it clear that the federal government was going to help the states with financial problems caused by the shutdown of the economy but not with financial problems caused by bad management.

The article reports:

Mitch McConnell said Wednesday that he is OK with states going bankrupt instead of increasing federal bailouts even further – as Democrats demand more money for state and local governments be included in the next coronavirus relief bill.

‘My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,’ McConnell lamented.

‘That’s not something I’m going to be in favor of,’ he continued in an interview with conservative radio talk show host Hugh Hewitt Wednesday.

‘I would certainly be in favor of allowing states to use the bankruptcy route,’ the Kentucky Republican senator said. ‘It saves some cities. And there’s no good reason for it not to be available.’

Many of the states looking for bailouts need bailouts because of unfunded liabilities such as pension funds and retiree medical expenses. The only way these problems are related to the coronavirus is that there is reduction of tax revenue coming in. However, these problems were eventually going to occur with or without the coronavirus.

The article notes:

He also insisted, however, that he didn’t want to send money to states just to have them used the money to bail themselves out of preexisting issues, like a pileup of pension debts.

‘You know, we’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,’ McConnell told Hewitt.

‘There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,’ he continued.

The Senate Majority Leader said he knows that states’ would rather have money given to them by the federal government in another large-scale coronavirus stimulus package.

I agree with Senator McConnell. Each state is responsible for its own financial situation. That’s part of what federalism is about. States who have managed spending better will come through this crisis in better shape. It is my guess that states that have consistently mismanaged money and raised taxes will have people moving out of their states in the coming months.

Never Let A Crisis Go To Waste

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If you look at the people who oppose voter id laws, they tend to be Democrats. I’m not accusing them of anything, but I do wonder why they would oppose something that would protect the votes of all Americans. Well, the coronavirus crisis has caused those who oppose voter id laws to take things a step further.

Just The News posted an article yesterday with the following headline, “Democrats pushing harder for ‘Vote by mail’ in November election.” I don’t mean to be cynical, but I believe that would be the end of honest elections.

The article reports:

House Speaker Nancy Pelosi said that she would like to see “vote by mail” funding of up to $4 billion in Congress’ next coronavirus stimulus package for upcoming elections.

Pelosi suggested on Wednesday that the funding would to help states “expand” their vote-by-mail capabilities and allow voters to cast ballots by mail rather than show up in-person at the polls.

“Vote-by-mail is so important to our democracy so that people have access to voting and not being deterred, especially at this time, by the ammunition to stay home,” Pelosi said on a conference call. “We need at least $2 billion, $4 billion is probably what would really democratize our whole system.”

On Tuesday, Pelosi said she does not know why anyone would oppose voting by mail in the next election.

Aside from the obvious problem of voter fraud, why does Speaker Pelosi think we will still be under threat of the coronavirus in November? I realize that the disease may make a comeback in the fall, but I suspect that by that time enough Americans will have developed immunity to the disease to minimize the problem or we will have learned how to successfully deal with the disease so that ‘social distancing’ will be a distant memory.

Because of their recent strong turn to the left, Democrats have lost a lot of American voters. The party that was previously the party of the working man has totally forgotten its roots. The only hope for a strong Democrat party in the future is illegal aliens voting or election fraud. Until the Democrats turn back toward the center, they will be a dying party. That is the reason voting by mail looks good to them.

Your Tax Dollars At Work

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On Thursday, Just The News posted an article about some of the things the National Institute of Health (NIH) is spending your tax money on.

The article reports:

On a steamy summer day inside the lecture auditorium of the storied National Institutes of Health headquarters, Dr. Michael Bracken delivered a stark message to an audience that dedicated its life, and owed its living, to medical research.

As much as 87.5% of biomedical research is wasted or inefficient, the respected Yale University epidemiologist declared in a sobering assessment for a federal research agency that spends about $40 billion a year on medical studies.

He backed his staggering statistic with these additional stats: 50 out of every 100 medical studies fail to produce published findings, and half of those that do publish have serious design flaws. And those that aren’t flawed and manage to publish are often needlessly redundant.

The article notes where the NIH has spent money instead of researching cures for a coronavirus pandemic:

As you weigh that question, consider this: In the 15 years since evidence first emerged that drugs like chloroquine might help in a coronavirus pandemic, NIH spent:

Just two days ago, in the midst of surging coronavirus deaths in America, NIH released a joint study by its National Cancer Institute and the National Institute on Aging that came to a heady conclusion: If you walk more, you are likely to live longer.

If the NIH had investigated chloroquine fifteen years ago, we might not have governors forbidding doctors to use it to treat coronavirus. It really is time to go through the federal budget line by line and get rid of stupid research projects and useless programs. We could probably pay for the stimulus package with what we cut and have money left over.

 

How Does This Statement Make Sense?

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Yesterday I posted an article that included the following:

…Newly-elected Rep. Rashida Tlaib (D-MI) also endorsed impeaching Trump on her first day in office, according to The Nation, which described Tlaib as calling for “immediate steps” to remove the president from the White House.

“Each passing day brings more pain for the people most directly hurt by this president, and these are days we simply cannot get back. The time for impeachment proceedings is now,” Rep. Tlaib declared.

I really am confused about how this president is hurting people. I am further confused by looking at Representative Tlaib’s statement in view of some economic news that was reported today.

For instance, CNN is reporting today:

US employers added 312,000 jobs in December, well above what economists expected and underlining that the American economy remains strong despite recent market turbulence.

The unemployment rate rose to 3.9% as more people were looking for work. It had been at a 50-year low of 3.7% for two of the last three months.

Employers added 2.6 million jobs in 2018, compared to 2.2 million in 2017. Revisions to the October and November estimates added an additional 58,000 jobs to the 2018 total.

…Paychecks grew as employers raised wages to attract new workers. Average hourly pay was up 3.2% compared to a year earlier. The average number of hours people worked also edged up.

…The unemployment rate rose because more than 400,000 people joined the labor force looking for jobs. The percentage of the working-age people in the work force matched a five-year high.

“Yes, the nation’s unemployment rate rose to 3.9%, but for the best of reasons,” said Mark Hamrick, Bankrate.com senior economic analyst. “That’s a deal we’ll take if more people are participating in the workforce.”

The chart that I watch to see how things are going is from the Bureau of Labor Statistics. It is the chart of the Workforce Participation Rate. It indicates how many Americans are actually part of the workforce. This is the chart:

Note that we have reached the 63.1 percent participation rate only three times since 2014. When President Obama took office, the rate was 66.2. By the time President Obama left office, the rate was 62.7. That was after the federal deficit doubled due to the stimulus package that was supposed to create jobs.

The House of Representatives has a choice–they can either join in the efforts of President Trump to improve the American economy and the lives of American workers, or they can do everything they can to slow it down. Unfortunately, the new rules they are putting in place will bring us laws and policies that will slow the economy down. That is unfortunate–Americans deserve better, even though they elected these people.

A Chart That Tells It All

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The chart below was posted in the Wall Street Journal yesterday:

image

The chart is based on numbers from the International Monetary Fund. The chart is contained in an article by Arthur Laffer about the impact of government stimulus spending.

In the article Mr. Laffer points out:

The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).

These numbers are particularly relevant as countries around the world are debating whether or not another round of stimulus spending is the answer to the current recession.

Mr. Laffer states:

Still, the debate rages between those who espouse stimulus spending as a remedy for our weak economy and those who argue it is the cause of our current malaise. The numbers at stake aren’t small. Federal government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007. This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, “cash for clunkers,” additional mortgage relief subsidies and, of course, President Obama’s $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now. Stimulus spending over the past five years totaled more than $4 trillion.

If you believe, as I do, that the macro economy is the sum total of all of its micro parts, then stimulus spending really doesn’t make much sense. In essence, it’s when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

If the government wants the producers in our society to continue producing, it needs to understand how human nature and incentives work. If I can make more money by not working than I can for working, it doesn’t take a rocket scientist to figure out that I am less likely to work.

I think Mr. Laffer is on to something. Please read the entire article at the Wall Street Journal for more information on the impact of government stimulus programs.

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The Truth Comes Out–Unfortunately It’s A Bit Late

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John Hinderaker at Power Line reported today on testimony given by Doug Elmendorf, head of the Congressional Budget Office to the Senate Budget Committee. Senator Jeff Sessions reminded Mr. Elmendorf of the CBO’s projection, made around the time the stimulus bill was enacted, that the measure would have a negative long-term impact on economic growth. Elmendorf confirmed that this is still the view of the CBO.

The article at Power Line contains a video of the testimony. So let me get this straight–we spend $800 billion-plus dollars, the unemployment rate is still at 9 percent or more, and the spending will have a long-term negative impact on economic growth. Where do we go to get our money back?

 

 

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