Megalextoria

President Biden is hitting the road and traveling across the country to pitch his $1.9 trillion COVID-19 stimulus and relief spending proposal to voters.

The legislation includes $1,400 relief checks, a further six-month expansion of “temporary” super-generous unemployment benefits that often pay more than work, $350 billion for bailouts for state and local governments, partisan provisions like a federal $15 minimum wage, and much more. Economists interviewed by FEE warned the package was an “economically unjustified” plan that “incentivizes unemployment.”

Yet with his road trip and ongoing lobbying efforts, Biden hopes to persuade voters and members of Congress that his stimulus proposal is necessary for long-term economic recovery. But a new Ivy League analysis suggests the opposite. 

Scholars at the University of Pennsylvania’s Wharton School of Business analyzed the plan and found that the massive spending splurge—which costs roughly $13,260 per federal taxpayer—would only cause a “slight uptick” in economic growth in 2021. The analysts warned that this minor boost would just be “instant gratification,” and that the skyrocketing government debt caused by the blowout legislation would undermine any gains in the medium-to-long term.

“The existence of the debt saps the rest of the economy,” Wharton analyst Efraim Berkovich said. “When the government is running budget deficits, the money that could have gone to productive investment is redirected.” 

“Effectively, what we’re doing is taking money from [some] people and giving it to other people for consumption purposes,” he continued. “That has value for social safety nets and redistributive benefits, but longer-term, you’re taking away from the capital that we need to grow our economy in the future.”

Biden’s costly plan would explode the national debt. This, per Wharton, would lead to a “crowding out” effect over the coming years as more loan money is taken away from productive business/private sector investments and instead consumed by government debt. 

As a result, the analysts find that workers would see a small decline—not an increase—in their hourly wages by 2022 and a slightly larger decline in their hourly wages by 2040. In 2022, the overall number of hours worked would actually fall due to the plan. 

So, Wharton concludes, Biden’s spending binge would actually lead to a smaller economy in 2022. How’s that for “stimulus?”

And we must also consider the other elements of Biden’s plan that would sabotage the economic recovery, like the inclusion of a federal $15 minimum wage. This partisan provision would eliminate millions of jobs, devastate struggling small businesses, and lead to higher consumer prices.

You might be wondering: Why would anyone support a stimulus effort that offers only small short-term gain in exchange for long-term economic detriment? It’s due to a common flaw in policy thinking that focuses on the seen benefits while ignoring the unseen costs.

Famed economist Frédéric Bastiat discussed this fatal flaw of policymaking in his essay “What Is Seen and What Is Not Seen in Political Economy.”

“[A] law gives birth not only to an effect but to a series of effects,” Bastiat wrote. Only the first effect is foreseen by naive policymakers who fall victim to this fallacy, while the many second-order consequences remain unseen.

“It almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse,” he wrote. “Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come—at the risk of a small present evil.”

It’s fair to say that in this case, the president is thinking like a bad economist. (Or a good politician). 

Biden knows that the short-term benefits of his proposal—like $1,400 checks in many peoples’ mailboxes—will be seen and felt by millions of voters who will directly credit him for it. (His name will even be on the checks). Yet the vast and diffuse costs imposed on people by the plan over time will most likely never be directly traced back to the legislation itself, instead observed only by economists and analysts who parse broad economic data and trends. 

So, Biden’s proposed stimulus can simultaneously be an economic net-negative and a political winner. And, unfortunately, many of our politicians won’t mind the tradeoff—because the only loser in this political bargain is the average American citizen.

This article was originally published on FEE.org. Read the original article.

President Biden has abandoned bipartisan compromise and pushed full-steam-ahead to pass his entire sweeping $1.9 trillion COVID-19 spending package. The president’s proposal includes $1,400 “stimulus” checks for more Americans, $350 billion to bail out state and local governments, a renewal of super-charged unemployment benefits through September, money for vaccine distribution, a federal $15 minimum wage, and much, much more. Democrats in Congress are determined to mark up the bill over the next few weeks and pass it by early March.

But the state of the economy doesn’t support this spending bonanza—not even close. 

The nonpartisan Congressional Budget Office is projecting a “rapid” resurgence in economic growth and a slower but steady return to pre-pandemic employment levels without any further stimulus. (We’ve already spent an astounding $4 trillion). And top free-market economists interviewed exclusively by FEE all argued that Biden’s drive for more massive stimulus is driven by politics, not sound economics.

“We absolutely don’t need another multi-trillion dollar stimulus,” Texas Tech economics professor Alex Salter said. “We’ve already spent $4 trillion fighting COVID since last year. Lack of spending isn’t our problem. Government should spend more on producing and distributing the vaccine, and otherwise get out of the way.”

Meanwhile, economist Stephen Moore of FreedomWorks argued that government spending can actually be a negative for the economy, because the money has to come from somewhere else. 

“Helicopter money merely redistributes wealth—it does not create it,” he said. “We don’t need this extra stimulus.”

Moore, who served as a top economic advisor for former President Trump, compared the Biden effort to similar stimulus bonanzas under the Obama administration, which resulted in the slowest economic recovery since the Great Depression.

“We learned from the Obama $830 billion “shovel ready” plan that Keynesian stimulus does not work,” Moore said. “Obama’s own numbers indicate that we ended up with fewer jobs than if we had done nothing at all to ‘stimulate’ the economy.” 

Another prominent free-market economist, Mises Institute Senior Fellow Robert P. Murphy, offered a similar assessment. He called the Biden proposal “economically unjustified” and suggested that “any of its good features could be achieved more directly through other policies.”

The economists interviewed by FEE took issue with not just the Biden plan’s massive spending levels and sticker price, but also several of its specific proposals such as more “stimulus” checks and the further expansion of ultra-generous unemployment benefits—originally sold as “temporary” last March—that would result in many Americans earning more money by not working, thereby disincentivizing employment.  

“More checks don’t make sense,” Salter, the Texas Tech economist, said. “Household balance sheets are strong. Many households saved large portions of the previous checks. Yet another direct payment isn’t about economic stability. It’s about buying political support.”

For his part, Murphy sympathized with the plight of those crushed by COVID-19 lockdowns but still viewed the checks as a misguided proposal.

“It is understandable that citizens want relief checks to compensate for coercive measures preventing them from earning income, but we shouldn’t continue this trend of everyone getting checks from the government,” he said. “Ultimately the public isn’t made richer by paying taxes that are then partially handed back to them.”

The economists had particularly harsh words for Biden’s proposed expansion of unemployment benefits way above normal levels. Unemployment payouts have long been shown in economic research to prolong unemployment and increase its baseline level.

“Expanding unemployment benefits during a recession has a predictable result: slower employment recovery,” Salter argued. “We should be helping people get back to work—not making it more financially attractive to stay home.” 

“The $400 a week unemployment benefit bonus included in the proposed bill incentivizes unemployment because it pays people not to work,” Moore added. “Passing this bill means risking the loss of more than 5 million jobs if people opt to receive unemployment benefits rather than work.”

In sum, though, the economists all agreed that no amount of spending can “stimulate” an economy that is in some places still locked down, and in many places still at least partially restricted. If people cannot legally go to work or engage in commerce, no amount of money-printing or number of blank checks can bring about prosperity, they agreed.

“The best thing we can do for long-run economic health is get everything opened back up safely,” Salter said. 

Murphy reached a similar conclusion, arguing that “the best way to help the economy is to end political lockdowns, allowing businesses, workers, and  customers to find the optimal mix of protective measures to deal with the threat of COVID-19.”

Of course, Biden’s “stimulus” legislation is really a political wishlist, chock-full of partisan policies like a $15 minimum wage and subsidies for poorly-managed blue states. Yet this isn’t immediately obvious from Biden’s rhetoric or much of the media’s coverage. As a result, the proposal polls well with voters.

With the growing chorus of free-market economists calling out the president’s pretense, hopefully the public will soon realize that there’s little economic justification for Biden’s political spending push.

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This article was originally published on FEE.org. Read the original article.