The American Rescue Plan Act of 2021 (ARP) is big. $1.9 trillion big. Think too hard about it and it’s scary. And that’s what the Republicans are banking on:
This time, Republicans were gambling that voters would become disillusioned with the scope and price of the plan, as well as the partisan process that yielded it, and punish Democrats accordingly.
“This isn’t a rescue bill. It isn’t a relief bill,” said Representative Kevin McCarthy of California, the minority leader. “It’s a laundry list of left-wing priorities that predate the pandemic and do not meet the needs of American families.” [I thought Senate Minority leader Senator McConnell (KY-R) said this, not McCarthy.]
They were also pointing to an increase in the deficit — which the Treasury Department reported on Wednesday had soared by 68 percent to $1 trillion in just the past five months — arguing that the package would add to an already crushing debt burden.
Top Republicans also sought preemptively to deny Democrats credit for any economic improvement that might follow the measure’s enactment.
“The American people are going to see an American comeback this year,” Mr. McCarthy said, “but it won’t be because of this liberal bill.” [The New York Times]
The Republicans are prognosticating, so let’s ask the obvious question: what’s their history in the field of prognostication on financial bills?
How about, say, that 2017 Tax Reform bill? Advertised by the Republicans then in charge of the Federal government to be a prime example of the Laffer Curve in action, it reduced corporate taxation levels, banking on the companies using the money suddenly not sent to the government to expand their operations and ignite a quickly growing economy, replenishing lost government revenues from the fizz of a quickly expanding economy.
Critics pointed out that the Laffer Curve history is one long failure, predicting that most of the money would be sent to shareholders in the form of dividends.
So what happened?
Here’s the GDP, in percentage terms, since 2000 for context, from the St. Louis Fed:
It’s hard to see any fizz there; those last two data points are reflective of the impact of the Covid-19 pandemic, but between 2017 and 2020 there’s no evidence of Republican-forecast gains, while Democratic and independent economists noted their forecasts were coming true.
And the deficit? Again, as a percentage gain or loss.
Unsurprising, isn’t it? The deficit was taking off before 2020, just as forecast by non-Republicans.
So let’s apply this lesson to our evaluation of the claims of such Republican leaders as McCarthy, Senate GOP Leader McConnell, opportunist Senator Roger Wicker (R-MS), head-shaker Senator Rick Scott (R-FL), and all future Republican claims that the ARP is either a disaster or irrelevant.
Because they have a vested, even existential interest, in its failure. But their history of financial prognostications are not only bad, they have been disastrously bad.
Let’s keep an eye out for third-party evaluations, instead.
And not pay any attention to this crew.
