A reader writes regarding the ARP:
This was a horrifically bad bill. Amounts to approximately $24,000 for _every_ household in the US, and that money will need to be sucked (in every sense of that word) out of the US economy which is likely to cripple it for years.
My inclination is not to argue whether it’s expensive – it is – but whether or not it will accomplish its putative purposes, plural as there are several, and whether those purposes are beneficial to the USA. That is, one of my favorite drums, which is metrics. I say this because we’re not talking about allocation of funds in a private company scenario, but a public scenario in which the government is trying to fulfill its responsibilities.
If it does not, then indeed the price could turn out to be crippling, although there’s been a growing intellectual movement to consider public debt as an asset rather than a burden. I don’t know that I agree with that idea, but I also haven’t sat down and studied it. My doubts start with interest rates and inflation, though.
But if it works, if we hit full recovery mode, it may helpfully pay for itself.
I can’t help but point out that parsing the price across households is misleading, as corporations will also be paying taxes, substantially reducing the per-household number. But I do not intend to get dragged into a discussion about how taxes will parse out.
All that said, my reader is in good company, such as Andrew Sullivan last week:
The nearly $2 trillion now being printed and borrowed and delivered directly to Americans is not about “rescuing” the economy. Pent-up demand, a big transfer of resources to ordinary people under the CARES Act, and an end to lockdowns will do that anyway. This package is about artificially super-charging the economy in the short term, while maximizing its redistributive effect. It’s a demonstration of the Democrats’ historically strongest argument: vote for us and we’ll take care of you.
It “slashes” poverty the easy way: by giving everyone who earns less than $75,000 a check for $1400, and by creating a new, no-strings subsidy for every child, in a direct repudiation of the welfare reform of the Clinton era. The goal is to make the subsidy permanent (and it sure will be hard to repeal). The ARP bails out union pensions; it expands access to Obamacare significantly; it creates generous spending programs for Native Americans, and even offers reparations to Latino, Asian and black farmers. …
But wait, there’s more. The Biden administration sees this $2 trillion as a mere hors d’oeuvre for a possible $4 trillion more in infrastructure and green investment. A few trillion over the last year; and a few trillion in the ARP; even more trillions for infrastructure. After a while, we’re talking serious money.
Yes, we are talking serious money. But I do worry that Sullivan is glossing details that do matter. For example, “pent-up demand” only holds for those with a substantial income. Think of those who’ve lost their jobs during the pandemic, companies destroyed, paycheck-to-paycheck workers, gig economy: If pent-up demand is localized, income-wise speaking, then that much pent-up demand takes time to generate and satisfy.
I do not expect the economy to take off like a rocket, and the 8% predicted by Goldman Sachs isn’t a rocket.
Or his worries about infrastructure. First, that’s not $4 trillion in a year, but spread out over a number of years, simply because infrastructure takes time. Again. And the drums have been beating concerning infrastructure for at least a decade, if not more.
It’s not a bad investment, properly managed. Hell, even former President Trump at least mouthed the word Infrastructure from time to time, even if he had not the wit to do anything about it. Or maybe his was merely the sleight of hand.
If I had time to study the ARP thoroughly, I might have advocated for implementing permanent Universal Basic Income (UBI) rather than sending checks. Maybe I would have suggested this or that.
And then there’s the question of veiled purposes. In a bill this size, there must be. In twenty years, what will historians find to talk about in this category? I look forward to finding that out.
But in the meantime, we should lament the failure of the Republican Party. Wise leadership would have made them, at the very least, a credible counterweight to a Democratic Party that tends to scare people, even if some of that scaring is from smooth Republican marketing.
But one thing that I had not picked up on is pointed out by Sullivan:
But don’t worry. No new taxes will pay for it. Cakes will be eaten and had too. The government will either borrow these trillions, or just print them, and the Federal Reserve itself assures us that there will be no consequences to this, and that a bigger debt than any since the Second World War for the foreseeable future is no problem. Interest rates will not rise, they assure us. Inflation will, at worst, nudge above 2 percent. Just as Trump pumped a trillion into an established recovery, so Biden will up the ante and pump trillions and trillions more into an already surging economy.
I tired of the No new taxes! mantra back when we were fighting two wars at once and the Republicans refused to raise taxes to pay for it. In my view, the 2017 tax reform bill should, at the very least, be voided; no doubt taxes should be raised even further in order to pay for this.
Otherwise, as Sullivan clearly also worries, interest and inflation will go up. Perhaps those are the two most important metrics, after accomplishing putative purposes, that should be kept in mind. I’ll try to remember to do that.
