“Biden’s $1.9 trillion ‘rescue plan’ isn’t saving the economy. It’s holding it back” by preventing job growth, writes Peter Suderman in Reason Magazine:
Instead of kick-starting the economy as promised, Biden’s Rescue Plan is holding it back. The most obvious way … is through boosted federal unemployment benefits… a typical beneficiary now gets the equivalent of more than $15 an hour to stay home, which is more than many would earn at work. For many, then, the straightforward economic incentive is to avoid work and collect checks instead. It’s not that there aren’t jobs available…Indeed, according to a report this week from the Bureau of Labor Statistics, there were 8.1 million job openings at the end of March, the highest number ever recorded. America is awash in demand for labor. What it lacks are willing workers. …. [That] helps explain why this month’s jobs report was the biggest miss in decades… the expectation was that the jobs report would show more than a million new jobs. Instead, the figure was a mere 266,000….Biden’s recovery plan paid people not to work. So it is hardly surprising that they are now not working… some of those jobs may simply not come back, leaving employers, consumers, and workers worse off… Jason Furman, who chaired President Barack Obama’s Council of Economic Advisers, cautioned this week that the unemployment bonus was likely slowing job growth… And there may be further consequences yet: Inflation is ticking up, with consumer prices growing at a faster rate than they have in a decade.
The federal government is borrowing lots of money to fund Biden’s $1.9 trillion “American Rescue Plan.” That increases our huge national debt. America’s national debt is as large compared to its economy as European nations’ debts were when they became unable to pay their debts during the European debt crisis. Those countries’ national debts were almost 130% of their economy (GDP). So is ours. Biden’s “American Rescue Plan” will increase our national debt by at least 9% of GDP, pushing our national debt further into the danger zone.
Biden’s plan sent staggering amounts of money to big-spending states that are flush with cash. California has a $75 billion budget surplus, due to high taxes, a boom in the stock market, and California-based tech giants becoming even richer in 2020. Yet Biden’s plan showered it with $27 billion. State tax revenue rose in at least 21 states, and in most cities and counties, in 2020. Yet Biden gave state and local governments $350 billion in aid. That aid was conditioned on the requirement that states spend the money they received, rather than using it to cut taxes — a requirement that an Ohio judge later found was likely a violation of the Tenth Amendment.
Biden’s plan wasn’t needed by our economy, which was already growing rapidly. Indeed, it will cut economic growth, by taking away some people’s tax credits if they work harder and earn more money. And it will shrink employment, by letting others stay on welfare even if they can work.
The economy will manage to grow this year despite Biden’s plan. But budget analysts say the “American Rescue Plan” will shrink the economy in the long run. By increasing the national debt, it will drive up borrowing costs and make it harder for businesses to raise money and create jobs. “The existence of the debt saps the rest of the economy,” says Efraim Berkovich of the University of Pennsylvania’s Wharton School of Business.