The US House of Representatives passed a $1.9 Trillion bill, dramatically increasing the US budget deficit. Presented as a COVID-19 relief measure, little of the money will be spent on tackling the virus. Instead, it will hose federal funds at every vested interest imaginable.
This massive injection of money will undoubtedly generate more economic activity short term. But it will not mean sustainable growth and will carry long term negative consequences.
According to the Penn-Wharton Budget Model every $1 of spending in this bill will only lift output by around 20 cents.
So economically illiterate is this measure, even economists that normally favor stimulus spending admit that this is not the way to do it. US federal debt as a percentage of output is now close to the level it was at the end of World War II.
Is there any principled idea behind what this bill is up to, or is this simply a product of political opportunism?
The most favorable explanation is that progressives believe that there is hidden slack in the economy, and that added demand will create its own supply.
I believe what we will see instead is inflation, and a weakening of the US economy’s ability to generate wealth in the long term. That means lower living standards, higher taxes, a devalued dollar, and debt.
What can we do about it? Our job here at the MCPP is to help set out the alternative. America is going to need a roadmap to recovery based on the principles of free markets and limited government.
As some test to destruction the idea that government is able to spend its way to prosperity, millions of Americans need to know that we have an alternative. State by state, in Mississippi and beyond, we need a national movement that develops that alternative. The future prosperity and happiness of our children, and their children, depends upon it.