Biden’s First Spending Blowout

From the WSJ Editorial, 16 January 2021:



…“With in­ter­est rates at his­toric lows, we can not af­ford in­ac­tion,” Pres­i­dent-elect Joe Biden de­clared Thurs­day night. He wasn’t kid­ding as he out­lined a $1.9 tril­lion Covid spend­ing plan, which comes on top of the $900 bil­lion Con­gress ap­pro­pri­ated last month, and the $2.9 tril­lion in the spring. And this is only Mr. Biden’s “first in­stall­ment,” as Sen. Bernie Sanders put it.

…this blowout has noth­ing to do with eco­nomic stim­u­lus. Nearly all of the money is for in­come re­dis­tri­b­u­tion—some to peo­ple in gen­uine need, but most to ad­vance long-term De­mo­c­ra­tic so­cial poli­cies, and to mas­sage con-stituen­cies like teach­ers unions and state politi­cians.

… Mr. Biden pro­poses $70 bil­lion for vac­cines, ther­a­pies and test­ing in ad­di­tion to the $42 bil­lion that Con­gress passed last month.

Most of the rest of the Biden plan is a re­peat of the 2009 Obama plan—dou­bled. State and lo­cal gov­ernments will get $350 bil­lion, though many have more rev­enue than be­fore the pan­demic thanks to buoy­ant eq­uity and hous­ing mar­kets…

Mr. Biden also wants to raise [both unemployment benefits and] the min­i­mum wage … It’s hard to imag­ine a more de­struc­tive pol­icy for small busi­nesses strug­gling to sur­vive, es­pe­cially in rural ar­eas and mid-Amer­ica states with lower wage lev­els than New York City. The strange eco­nomic logic seems to be to make it more ex­pen­sive for busi­nesses to re­hire work­ers while giv­ing those work­ers less in­cen­tive to re­turn to work.

He also wants to ex­pand the earned-income tax credit for child­less adults, a …child tax credit …a larger Oba­ma­Care pre­mium tax credit and a $4,000 child-care tax credit. This is De­mo­c­ra­tic so­cial pol­icy trav­el­ing as tem­po­rary Covid re­lief. Don’t be sur­prised if the tax cred­its all be­come per­ma­nent fea­tures of the tax code—and a dis­in­cen­tive to earn more at the risk of los­ing the cred­its as they phase out.

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