John Hood: Stimulus bill is reckless
RALEIGH — The $1.9 trillion “COVID relief” bill just enacted by Congress and signed by President Joe Biden gives out $1,400 checks to most Americans. It boosts the child-tax credit, keeps weekly unemployment-insurance checks $300 higher than normal, and throws lots of other (borrowed) money around.
I realize that, given the effects of the pandemic and subsequent lockdowns, most voters seem to like Biden’s bill. But I think they are mistaken. It is a reckless and irresponsible bill — one that, I’m pleased to report, most of North Carolina’s congressional delegation voted against.
Over the past year, the federal government has authorized $4.1 trillion in response to the COVID crisis. I supported some of that initial spending. We had a public-health emergency and a sudden, sharp economic decline. It was reasonable to expand UI eligibility and payments for a time.
It was reasonable to supply liquidity to businesses clobbered by public-health regulations. It was reasonable to put billions of dollars on the table for vaccine development, assisting and incentivizing the pharmaceutical industry to achieve one of the greatest medical advances in the history of our planet.
Given that the federal government entered the crisis with its budget already severely out-of-whack — running trillion-dollar deficits — it was even reasonable to pay for last year’s COVID response with borrowed money. We weren’t going to raise federal taxes in the midst of all this.
Of course, all federal debts are paid with federal taxes in one form or another. To spend $4.1 trillion today on reasonable priorities is, inevitably, to spend $4.1 trillion less in the future on other things, or to pay $4.1 trillion (plus interest) in higher taxes in the future. That’s just math.
Actually, though, we didn’t spend all that $4.1 trillion authorized in 2020. According to the latest estimates, some $1 trillion of it remains unspent at this writing. So here’s strike one against Biden’s new $1.9 spending spree — last year’s spending spree isn’t even over yet!
Clearly some of last year’s “emergency” need wasn’t a true emergency. Biden has doubled-down, and then some, on that mistake. His 2021 package includes a $350 billion bailout of states and localities whose true COVID-related fiscal shortfalls are only a fraction of that amount. Comparatively well-governed North Carolina will get $9 billion of it, yes, but poorly governed jurisdictions will get more. The implicit message to politicians is: spend recklessly, create fiscal messes, and Congress will eventually come along to bail you out with federal debt. As a result, we’ll get worse state and local governance in the future.
In addition to that, the Biden bill directs $126 billion to public schools, supposedly for COVID mitigation, though the Congressional Budget Office estimates only five percent of it will be spent by this fall. In fact, more of these funds will be spent in 2026 than in 2021. COVID mitigation this is not.
There are too many other problematic provisions to list in a single column. Instead, I’ll answer the obvious questions. Doesn’t our economy need another dose of stimulus? Isn’t that worth adding an average of $14,000 per household to the federal debt?
No and no. Although the COVID recession was disastrous for many families, it is already in the process of receding. North Carolina’s headline unemployment rate shot up to nearly 13% in April and May. It is now 6.2% — higher than it should be, of course, but hardly the emergency we faced a year ago. Many firms and households have accumulated significant balances that they’ll be spending over the coming months and years on both consumption and investment. To borrow another $1.9 trillion for “stimulus” in this scenario is indefensible.
In 2009, newly elected President Barack Obama pushed through a $787 billion stimulus. Many were outraged by such fiscal irresponsibility, as they should have been, though the unemployment rate was much higher then (North Carolina’s averaged 11% during 2009). Adjusted for inflation, Obama’s stimulus would be about $1 trillion today.
Biden’s $1.9 trillion mess should earn him scorn, not approval.
