The Costs And Pluses Of Bidenomics

President Joe Biden’s economic program is becoming fairly clear and as expected it imposes severe costs on the U.S. economy. There are however also some positive nuggets, which we should welcome and hope to keep for better times ahead. Even with those nuggets, however, the economic outlook is grim, largely because of policies on which all Presidents for the past two decades have been agreed.

Biden last week produced a $1.9 trillion “stimulus” plan, an opening bid of spending, supposedly to relieve the short-term pain of the Covid-19 pandemic. The least objectionable item in the plan, costing about $400 billion, is to give $1,400 cash grants to all U.S. citizens, on top of the $600 grants authorized at the end of 2020. Cash grants to citizens get spent on items citizens want and need, which results in better resource allocations than governments spending the same money. $400 billion given to the people is $400 billion not dropped without a trace into the inefficient maw of government, at whatever level.

architectural photography of white house

Source: Unsplash 

This additional grant brings Biden in line with President Trump and shows how futile was Mitch McConnell’s gesture in stopping Trump’s amendment of the last stimulus plan, preventing the $600 from becoming $2,000 just before the Georgia Senate run-offs. The critical factor in those run-offs (apart from any possible shenanigans) was a decline in turnout in heavily Trump rural areas – for whom $2,000 is a lot of money, which Republicans were preventing them from receiving. McConnell’s obstruction was thus the ultimate in futile gesture politics, that may well have cost him the Senate majority. Trump’s tantrums were unfitting to the leader of the free world, but you cannot say that on this occasion he was not justified in his annoyance.

The other item in Biden’s wish list that gets to actual people is the increased supplemental unemployment compensation to $400 per week and its extension to September from March. The problem with this is that the economy should have reopened well before September and, in a reopened economy, a supplemental $400 in unemployment insurance is simply an incentive not to find a job. The Obama administration made a similar mistake in 2010-12 when the extended unemployment insurance coverage to 99 weeks; in a dull job market, all too many people took full advantage of the extension.

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(The Bear's Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of "sell" recommendations put ...

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