Coronavirus

The Coronavirus Stimulus Is Full of Wasteful Spending

This will not end well.

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Two weeks ago, President Donald Trump signed the largest stimulus bill in U.S. history: more than $2 trillion.

For once, both Republicans and Democrats agreed. The Senate voted 96-0. The House didn't even bother with a formal vote.

At the White House, a reporter asked the president, pointing out that the bill includes $25 million for the Kennedy Center, "Shouldn't that money be going to masks?"

"The Kennedy Center has suffered greatly because nobody can go there," Trump responded. "They do need some funding. And look—that was a Democrat request. That was not my request. But you got to give them something."

"Something" they got. The bill includes $25 million for congressional salaries, $50 million for an Institute of Museum and Library Services, and lots of other wasteful things.

Only a few politicians were wary. Rep. Thomas Massie (R–Ky.) complained that he wasn't even allowed to speak against the bill.

Rep. Alex Mooney (R–W. Va.) asked: "How do you pay for it? Borrow it from China, borrow it from Russia? Are we going to print the money?"

Those are good questions.

Our national debt is already $24 trillion. Now it will jump, percentage-wise, to where Greece's debt was shortly before unemployment there hit 27 percent.

Greece was bailed out by the European Union. But the United States can't be bailed out by others.

How will we pay off our debt? That's the topic of my new video.

There are really three options:

  1. Raise taxes.
  2. Print money.
  3. Default.

Let's consider each:

  1. Raising taxes on rich people is popular. Even Michael Bloomberg wants "higher taxes on billionaires" like him

But raising taxes on the rich often kills the wealth and jobs some rich people create. And it won't solve our debt problem. Even if we took all the billionaires' wealth—reducing their net worth to zero—it would cover only an eighth of our debt.

  1. Some on the left now say, "Don't worry about debt, just print money!"

This belief, called Modern Monetary Theory, destroys lives.

Zimbabwe's dictator tried it. Eager to spend more money on wars, higher salaries for government officials, and luxury for himself, he had his government print more money. But that meant more money pursued the same goods. That caused explosive inflation. Soon, a $2 bag of onions cost $30 million Zimbabwean dollars.

The more money the government printed, the more inflation there was. They eventually even issued 100 trillion dollar bills. Today those 100 trillion bills are worth about 40 cents.

Inflation wrecked lives in 1920s Germany, Argentina, and Russia, and in modern-day Venezuela, too.

  1. America could simply refuse to pay our debt. But that would betray everyone who invested in America, and bankrupt Americans who bought Treasury Bonds.

Defaulting on your debt wrecks economies, too. When Argentina defaulted, unemployment rose to 21 percent.

Once you're deep in debt, no option is good.

How did we get to this point?

Presidents have talked about the dangers of debt for decades. But they didn't deal with it; they just talked about it.

"We have piled deficit upon deficit, mortgaging our future and our children's future," warned Ronald Reagan. "We must act today to preserve tomorrow."

Bill Clinton said, "We've got to deal with this big long term debt problem."

Barack Obama called driving up the national debt "irresponsible" and then proceeded to do exactly that.

Donald Trump complained that Obama "doubled" the nation's debt. But now, under Trump's presidency and the new CARES Act, our debt will grow even faster.

This will not end well.

So far, the deficit spending hasn't done enormous harm. But it will. You can stretch a rubber band only so far, until it breaks.

Our debt will wreck our children's lives.

Yet, today politicians mostly talk about spending more.

COPYRIGHT 2020 BY JFS PRODUCTIONS INC.

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  1. “The Coronavirus Stimulus Is Full of Wasteful Spending”

    Wow, it must have taken a lot of journalistic shoe-leather to figure *that* out.

    1. What I’d like to know is: Is there anything at all in the bill that isn’t wasteful, uncessesary, and/or necessary only because of damage done by earlier government responses to the pandemic?

  2. Oh, and depressing remarks about the debt situation.

    Maybe the plague will get to us first.

    Time to turn up some music to a high volume and drown out the anxiety.

    https://www.youtube.com/watch?v=dx5KnFr9xSk

  3. There’s a fourth way to pay down the national debt: cut spending. That’s better than raising taxes. But it has no hope.

    I wonder if we’ve crossed the point of no return which breaks down all resistance to future huge spending. Or maybe TARP did that 12 years ago, but it took this disaster to bring it out in the open. Up til now, it’s manifested only in Trump’s continued high spending.

    Green New Deal spending (but not the GND itself; that is still literally impossible) suddenly seems a lot more plausible, and MMT not far behind.

    1. I think you’re on to something here

    2. I think you’re right. We’re at the point where most people are asking “What are the consequences of the USG taking on debt it never intends to pay off?” If one day our creditors come knocking asking for what we don’t have the money to pay, what exactly can they do to us? We have the strongest military in the world. We have one of the biggest economies. If you say “pay me” and we say “No”, there is shit you can do to enforce the first part except say “I won’t give you anymore money”. Which honestly, barely counts as a punishment as we don’t actually need to do deficit spending. We just like to do deficit spending.

      1. The above “we” referring to the USG and people who support deficit spending for the USG.

    3. If they just freeze spending, that will help over time.

    4. I hate to inject reality here at Reason, but it is the spending of the House of Representatives. Period. Read the constitution.
      Yes, the same house that refused to even discuss the issue.
      Yes, the same house that passed the bill (AGAIN!) without bothering to read it.
      Yes, the same house the WE elected.
      Yes, the same house the will be up for election in November; if we bother with elections again.
      So; if you think this was a bad, hound the candidates and try to elect weasels that will stop spending like drunken democrats.

      1. “I hate to inject reality here at Reason, but it is the spending of the House of Representatives. Period. Read the constitution.”

        Perhaps you need to re-read the constitution.

        Yes, spending bills are required to originate in the House,of Representatives, but they still have to pass the Senate and be signed by the President.

        1. Not to mention that the House did not originate the bill on its own, it was done in coordination and consultation with the WH.

      2. You include those bills the Senate guts and amends? If not, your knowledge of the matter is deficient and unreliable.

        Oh and wait … wasn’t there something about bills have to be approved by the Senate too? Then signed by the President?

        Oh dear, someone’s got the partisan bug again.

    5. You know TARP ended up deficient neutral right? Loans are more libertarian than the handouts such as the 2009 stimulus. Why would you focus on TARP? Baseline budgeting is the worst aspect since Reid and Pelosi used the excess TARP outlays as future baselines. But TARP itself was actually deficit neutral.

  4. “How did we fall so deep in debt? “, said Mr. Stossel.
    We should not be asking how, but rather asking why it’s worse now than it was a little over three years ago.

  5. But now, under Trump’s presidency and the new CARES Act, our debt will grow even faster.

    Now Stossel has shown that he is not a true libertarian. He criticized Trump. He’s just another progressive anarchist. Like me. Because that’s the only explanation of why anyone would dare say something unflattering about the Best President Evah!

    1. So, so broken

    2. Just pathetic. When was the last post you had not about trump?

    3. How is he going to get clicks if he doesn’t mention Trump?

  6. There is one very important piece to the debt puzzle you forgot to mention… and you were there telling me about it when it was happening! The Social Security Trust Fund!

    Remember how we were never going to be able to pay for all the retirees that were coming with the baby boomers? So we had to store up a bunch of money in a Trust Fund… or else we’d have to pay those benefits out of current tax revenues, which would require raising taxes to 70% across the board!

    And when was that financial apocalypse supposed to hit? 2024.
    Yup. It is upon us right now. At the moment when we are supposed to be drawing on that trust fund, we are running up debt at an insane rate, at half the national budget the last decade, but now we just cavalierly pass “stimulus” and “quantitative easing” measures that double the entire national annual budget.

    Between all these factors, we are an schedule to spend some 6-8 trillion dollars this year, while taking in maybe 3 trillion dollars?

    Yet more evidence that we have lost our damn minds.

    1. In fact, I don’t know if you own or have access to the footage, but it would be really cool to pull old footage of Stossel from 30+ years ago explaining why the Trust Fund is a sham, and contrast those promises with where we are now.

      I’ll bet that there are lots of figures that are way, way worse than projected. Population growth is probably below projections, even though workforce might be above projections because of the near full participation of both men and women in the workforce these days. The debt has to be well above projections. Life expectancy might well be above projections.

      Inflation is probably below projections by a pretty wide margin. (explain that one!)

      Yeah, it would really be an interesting project.

  7. It will end well for all those folks who will be screaming that “This is what we get for following capitalism.” Maybe a few “extreme right wing” journalists and think tanks will discern the real problem but how many in the public will ever hear from them?

  8. You gotta have incentives. People don’t do what they should do just because they should do it, otherwise you wouldn’t see so many fat people around. They know they should eat less, eat better, exercise more, but, look, somebody brought donuts in this morning! The candy bars are right there at the check-out! Oooh, there’s that Cheetos ad, I wonder if we have some Cheetos in the cabinet. The short-term pleasure of stuffing your fat face with junk food outweighs the long-term damage of poor health. Gotta figure out some way of making eating well pay in the short term.

    I’ve been saying for years, fix Social Security by admitting it’s simply welfare for old folks – we stole your money and gave it to your grandparents with a promise that when you retired we’d steal your grandchildren’s money and give it to you – and phasing in a privatized retirement system or actually start investing retirement revenue, and fix Medicare/Medicaid by limiting access for those who refuse recommended treatments (i.e., doctor’s recommendations to quit smoking, lose weight, eat healthier, etc.) and you’ve taken care of half the problem.

    For the other half, allocate funding authorization directly to individual Congresscritters. Give every Senator and Representative say 2 trillion dollars to distribute as they see fit amongst all the various government agencies, whatever they don’t spend, half of it goes back to the Treasury and the other half they can stick in their pocket. Boom, we’ll be running a budget surplus next week. Later, you’re going to have 5 thousand people running for office in every district and they’re all going to be competing to be the low bidder on the contract. You’ve incentivized government to be as small and efficient as possible.

    1. *Meant to say distribute 2 trillion dollars equally among all the individual Senators and Congressmen – not that each one gets 2 trillion.

      1. Why do I get the feeling that the Sanders, Bidens, Clintons, and Pelosis of the world would actually end up putting the most in their pocket?

      2. We’d come out ahead if we directly paid every Congressman and Senator $10 million per year as long as they didn’t pass any legislation.

    2. Give every Senator and Representative say 2 trillion dollars to distribute as they see fit amongst all the various government agencies, whatever they don’t spend, half of it goes back to the Treasury and the other half they can stick in their pocket. Boom, we’ll be running a budget surplus next week.
      ———-
      I have thought this about every government agency for a while. Instead of “spend it or lose it”, we should do “save it and keep half”.

  9. Another solid article from Mr. Stossel.

  10. But people with (R) after their names like it. R means good.

  11. There is no reason for these type of massive bailouts. There are already existing programs that can address problems. Like unemployment insurance and small business loans. Yes it will spend more money but it is better than these throw in the kitchen sinks bills. Here is one of the problems with having so much money in politics. Ideally we focus on the people being hurt and out of a job. But you want to help them you need to bail out the big guys too because they own the politicians.

  12. This headline might be more obvious than ‘the sky is blue’

  13. Please remove $25 million salary increase. It is misinformation.

  14. But raising taxes on the rich often kills the wealth and jobs some rich people create

    OR, not:

    https://fas.org/sgp/crs/misc/R42111.pdf
    Congressional Research Service – Tax Rates and Economic Growth
    • 1950-1970 – Average Top Marginal Income Tax Rate: 84.8%, Rate of Growth in Real GDP: 3.86%, Rate of Growth in Real Net Fixed Investment: 0.93%

    • 1971-1986 – Average Top Marginal Income Tax Rate: 51.8%, Rate of Growth in Real GDP: 2.94%, Rate of Growth in Real Net Fixed Investment: 0.32%

    • 1987-2010 – Average Top Marginal Income Tax Rate: 36.4%, Rate of Growth in Real GDP: 2.5%, Rate of Growth in Real Net Fixed Investment: 0.23%

  15. “Barack Obama called driving up the national debt “irresponsible” and then proceeded to do exactly that.”

    And Conservatives want to peddle the myth that the term “racist” is being overused.

    A Black man inherits a hole digging machine running full tilt, aka a +$1.2 trillion structural deficit, and the racists blame him for the increasing depth of the hole as he reduced government spending at the fast rate since the Eisenhower administration.

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