Why The Biden Pandemic Stimulus Bill Won’t Help The Economy

President Biden And VP Harris Meet With GOP Senators To Discuss American Rescue Plan

WASHINGTON, DC - FEBRUARY 01: U.S. President Joe Biden (Center R) and Vice President Kamala Harris (Center L) meet with 10 Republican senators un the Oval Office (Photo by Doug Mills-Pool/Getty Images)  GETTY IMAGES

 

President Biden’s proposed stimulus/relief bill won’t help the economy, though it may help some at the expense of others. Neither cold logic nor the numbers support the idea that an additional $1.9 trillion of federal spending will provide any impact to the overall economy.

For the logical experiment, begin with the sectors that are sub-par now: leisure and hospitality, which includes restaurants, bars, hotels, theaters, professional sports, museums, and so forth. How much federal money would induce my neighbors and me to go out to dinner? Unless our governor is bribed to allow restaurants to re-open, no amount of money will do the trick. That pretty much holds true for all other weak parts of the economy.

In addition to leisure and hospitality, school employment is down, both for public and private education. Many teachers are working remotely thanks to Zoom and other platforms, but the unused buildings don’t need janitors and the cafeterias don’t need cooks and servers. New federal money won’t will get the schools to reopen.

Some weakness occurs in other industries, but mostly that’s attributable to leisure and hospitality, and education. Wholesale trade is down, for example, but that sector includes the people who sell paper products to restaurants and schools. Stimulus won’t get those sectors to expand.

That’s the logical story. The numbers reach the same conclusion through a different path, described recently by Larry Summers. Let’s assume that stimulus would get those activities going, or some substitutes. That is, with enough federal stimulus the unemployed waiters, hotel clerks, and school janitors would find work elsewhere. How much stimulus would that take? Even that question assumes that everyone were willing to shift quickly, for a temporary new opportunity. But let’s make the assumption.

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