Joe Biden has released his plans for an emergency relief package; the proposal, called the American Rescue Plan, has a price-tag of $1.9 trillion. It includes direct income support payments of $1,400, which raises the stimulus checks to $2,000. His plan also boosts the federal minimum wage to $15 per hour, increases the federal per-week jobless benefit to $400 until the end of September, and extends moratoriums on evictions and foreclosures until September. Tens of billions of dollars more will be earmarked for state and local governments, education, and COVID-19 testing and vaccinations.
President-elect Biden also confirmed that his second major spending initiative will be released in February that would target his long-term goals, like combating climate change, advancing racial equity, and supporting $10,000 in student loan forgiveness. Where is the money coming from? Money printing, capital markets, and bond issuance. Are we witnessing the birth of what will ultimately be termed Bidenomics?
What are the core principles of Bidenomics? It seems not even President-elect Joe Biden knows. From what we can parse through the vague platitudes, the incoming president’s economic agenda will consist of spending, spending, and spending – and some more spending. From canceling student debt to greater COVID-19 stimulus and relief packages, the next two to four years could be challenging for Uncle Sam’s pockets. At least Biden has a diverse Cabinet that is representative of the U.S. population. Surely that will make up for the job crisis and soaring price inflation, right? Right?
Biden previously promised that the price tag for his planned packages “will be in the trillions of dollars,” warning that “if we don’t act now, things are going to get much worse and harder to get out of a hole later.” If you think the U.S. government printing and spending trillions of dollars is astronomical now, then, as the young whippersnappers say these days, you ain’t seen nothin’ yet.
Since March 2020, Liberty Nation has reported extensively on the coming COVID-19 inflation tsunami that will hit America’s shores. Price inflation is already rearing its ugly head, causing Americans to pay more at the grocery store and deal with higher real estate prices. Indeed, the price tags for the things you need are already climbing.
In addition to supply-chain disruptions and draconian state measures, the three levels of government put everything on the credit card over the last year. The federal deficit is expected to remain above $1 trillion until 2030, while the national debt will likely hit $30 trillion by the time Vice President-elect Kamala Harris, er, Biden campaigns for re-election.
Unless the Biden administration adopts modern monetary theory (MMT), a neo-Keynesian policy that advocates unlimited money-printing, all these outlays will need to be repaid. Biden and the Democrats can approve trillion-dollar stimulus-and-relief packages all they want without any serious pushback, but accounting and basic economics rules dictate that these funds must be paid back somehow. The repayment solution will consist of higher taxes or currency depreciation. Pick your poison.
It is not only economists who are ringing the alarm about inflation. The spike in Treasurys – the benchmark ten-year yield topped 1% for the first time since March – signaled that the broader financial markets are fearful about inflation. Of course, the upward movement in gold, silver, and even bitcoin prices suggests that investors are losing sleep over currency debasement and surging prices.
Will this have an impact on the overall economy? Typically, when inflation soars, the U.S. central bank responds with interest rate hikes. Last summer, the Federal Reserve abandoned textbook monetary principles, confirming that it would allow inflation to run higher for longer without raising interest rates. This is beneficial for the Biden team since historically low rates can artificially stimulate the economy, despite the cost of everything ballooning. In other words, the Eccles Building can sustain the mirage of economic growth with a near-zero-interest-rate-policy (ZIRP), enabling Washington to spend more. Since the Fed is unlikely to taper the balance sheet anytime soon, the institution will monetize the debt, leading to an acceleration of the business cycle.
Peter Reagan, a financial market strategist, recently wrote for Newsmax:
“Bottom line: The economic reality for millions of ordinary people is terrible right now. Biden’s administration doesn’t have a coherent plan for making it better. There’s only so much zero interest rates and monetary inflation can do to revive an economy on life support. Whether or not the patient recovers, that same economic strategy will devour our savings and crush our dreams of a stable future.”
Bidenomics the Cure for a Jobs Recession?
Let’s be frank: Is there a labor crisis in America today? Well, it depends on what you mean by crisis.
The December jobs report was disastrous. The U.S. economy shed 140,000 jobs, the unemployment rate stagnated, and only two sectors recorded employment gains (manufacturing and professional services). Early forecasts suggest that January could be a repeat performance as more jurisdictions resort to lockdown measures and restrictions to combat the second wave of the coronavirus pandemic.
It is anybody’s guess as to when the labor market will normalize. In perhaps an ominous sign of the future, the data going back to the 1980s show that prime-age employment (22-54) never goes back to pre-recession levels following an economic collapse. With the U.S. economy potentially decimated for many years to come, it could be a long time before the employment boom of the last four years is emulated. The situation will be exacerbated by higher tax rates and increasing regulations.
That said, the president-elect thinks that he can turn things around with his clean energy plan, an initiative that would create ten million jobs. Biden stated on his website:
“If executed strategically, our response to climate change can create more than 10 million well-paying jobs in the United States that will grow a stronger, more inclusive middle class enjoyed by communities across the country, not just in cities along the coasts.”
Is this feasible? Perhaps the figure is exaggerated, but a Green New Deal-type of public policy could spawn many jobs – and that is not necessarily a good thing. When you are pumping the economy with artificial stimulus and relief, you will inevitably create employment opportunities by taking from your left hand and giving it to your right. This is the famous Frederic Bastiat principle of What Is Seen and What Is Unseen. The federal government is taking money out of the private sector – and other industries – to establish a grand public-works scheme. This distorts the economy and skirts what the market is signaling. The other factor is that a Green New Deal ignores the energy industry’s goal: produce as much power as possible at the lowest cost. So, for example, it takes 79 solar workers to generate the same amount of electric power as one coal worker. On the surface, that is 78 additional workers. But that is 78 workers who could be doing something else the economy commands.
This could be the difference between Trumponomics and Bidenomics. President Trump put together an environment – lower taxes and fewer regulations – to incentivize job creation. President-elect Biden will use government intervention – higher taxes, more regulations, and greater subsidies – to create jobs.
It’s Inflation and Jobs, Stupid!
Biden can impress coastal elites and progressive crowds with his wokeness and e-literate public policy proposals. This will do nothing for the 75 million Americans who are indifferent to skin color and genitalia and more concerned with jobs and putting food on the table. Did Biden and the Democrats learn nothing from the last four years? Apparently not. It is not too surprising as they spent this time feigning outrage over fake news, tweets, and Orange Man Bad.
Read more from Andrew Moran.