Since conservatives and the new brand of Republicans seem to dislike Senator Mitt Romney (R-UT), the two-time presidential candidate might be trying to endear himself to progressives with his latest stimulus proposal. But Romney’s idea could further weigh on Uncle Sam’s finances, proving that the GOP is abandoning any semblance of fiscal conservatism.
Mitt Romney: Please Like Me
Called the Family Security Act, Sen. Romney proposes up to $4,200 per year for every child up to the age of six and $3,000 per year for every kid between six and 17.
The Democrats have outlined a similar idea in the $1.9 trillion stimulus package ($3,600 and $3,000). The critical difference is that Romney has recommended a way to pay for this new form of entitlement spending by eliminating the Temporary Assistance for Needy Families (TANFs), State and Local Tax Deduction (SALT), and current federal tax credits for working families and children. According to Romney, this monthly cash payment would not add to the ballooning federal deficit:
“American families are facing greater financial strain, worsened by the COVID-19 pandemic, and marriage and birth rates are at an all-time low. On top of that, we have not comprehensively reformed our family support system in nearly three decades, and our changing economy has left millions of families behind. Now is the time to renew our commitment to families to help them meet the challenges they face as they take on [the] most important work any of us will ever do — raising our society’s children.”
As former Florida Governor Jeb Bush (R) would say, please clap. Other countries possess a universal child benefit system, including Canada, which pays a maximum annual benefit of $6,400 for a child under the age of six and $5,400 per child aged six through 17. But is this something the U.S. could afford, considering its federal deficit is north of $3 trillion, and the national debt is around $28 trillion? The state of America’s finances suggests that it cannot afford anything.
Paul Krugman Flip Flops Again
When a Democrat is in the White House, budget deficits do not matter. When a Republican sits in the Oval Office, deficits matter again. At least, this is how the mind of Keynesian darling Paul Krugman operates.
Speaking in an interview with Katy Tur on MSNBC, Krugman endorsed President Joe Biden’s $1.9 trillion coronavirus stimulus and relief deficit-financed spending: “We can afford them, so why not do them?”
The U.S. government cannot afford it because it is deeply in debt and is still paying off all the Great Recession-related spending from more than a decade ago. Washington will turn to the Federal Reserve to turn on the printing presses and monetize the debt. But this is preaching to the conservative and libertarian choir at this point.
The real story behind Krugman’s comments is how much he changes his opinions depending on who holds power. Throughout the Obama regime, Krugman continually advocated greater public spending to “end this depression now!” despite the economy entrenched in the business cycle’s boom phase. In 2016, when it looked like Hillary Clinton would become the 45th president, Krugman urged her to ignore “the debt scolds.” But then, once former President Donald Trump was victorious, he wrote a blog post for The New York Times, titled Deficits Matter Again.
It is as if Krugman is desperate for some position in the White House, whether it is a chief economic advisor to the president or a West Wing receptionist.
Till Debt Do Us Part
Debt issuance by governments and corporations could take a breather this year as the global economy gradually recovers from the coronavirus pandemic, says a new report from one of the world’s top credit rating organizations.
S&P Global is forecasting that the amount of debt put forward by nations and companies worldwide could decline to $8 trillion in 2021, down 3% from last year’s record high. But this would still be 15% higher than pre-COVID-19 levels. While the recovery will not be complete in 2021, everyone will be attempting to plug some holes in the sinking ship.
“Despite a likely decline, supporting factors for issuance in the year ahead include still-favorable financing conditions,” S&P said in a report, “anchored by increasing amounts of sovereign debt with negative yields, and a rejuvenated merger and acquisition pipeline for corporations.”
In a year that everyone wants to toss down the memory hole, global debt exploded by $19.5 trillion to combat the coronavirus public health crisis. This represented about 124% of gross domestic product (GDP) for advanced economies and 62.5% for emerging markets.
What makes things worse is that many governments were already running notable budget shortfalls that added to their debts. Countries did not tap into their rainy-day funds to fight the virus and its impact on the economy, choosing to print money and exploit capital markets. This is debt that will never be repaid. When the central bank is suppressing interest rates, why bother swimming out of the ocean of red ink?
Read more from Andrew Moran.
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