Biden wants more reckless spending
he American people’s confidence in the presidency has plummeted 15 points on President Joe Biden’s watch — falling to 23%, according to a new Gallup poll, its lowest point on record. One of the many reasons for this collapse is the worst inflation in four decades. And Biden learned this week that inflation is probably not going to ease anytime soon — because Americans have barely touched the trillions in excess savings they have built up, thanks in large part to his catastrophic American Rescue Plan.
One of the main reasons inflation is skyrocketing is because Biden’s first act as president was to pass nearly $1.9 trillion in social spending disguised as pandemic relief — sending millions of Americans stimulus checks, providing the largest child tax credit payments ever, and extending ludicrously generous unemployment supplements that paid many Americans more to stay home than to work.
The additional spending was completely unnecessary. Congress had just passed a $900 billion economic stimulus package in December 2020, on top of all the earlier covid-19 relief measures Congress had approved. And thanks to the arrival of vaccines, when Biden took office, the pandemic was already fading, and the economy was recovering as people were getting back out and leading more normal lives.
But Biden wanted to show he was doing something — so he passed the American Rescue Plan, pouring an additional $1.9 trillion into the economy so he could claim credit for the post-covid recovery. He did it despite warnings from even liberal economists, such as former treasury secretary Lawrence H. Summers, who cautioned the president that his plan would “set off inflationary pressures of a kind we have not seen in a generation.”
This was, according to Michael Strain, director of economic policy studies at the American Enterprise Institute, “arguably the biggest fiscal policy mistake in several decades.” With all that free money from Washington, personal savings rates soared. According to Moody’s Analytics, by the end of 2021, U.S. households had built up $2.7 trillion in excess savings above what they would have had there been no pandemic.
Flush with government money, millions of Americans decided they could afford to stay on the sidelines and not to return to work — producing a historic labor shortage. Demand for goods and services soared as people emerged from pandemic lockdowns and started spending again, but supply could not keep up — in large part because businesses could not find workers. The result is inflation the likes of which we have not seen since the 1970s.
Today, the labor shortage persists, virtually unabated. There are nearly 11.3 million unfilled jobs in the United States today, a number almost unchanged from the record 11.85 million in March. Surveys show 60% of small businesses can’t find workers to fill open jobs. And the labor shortage is not likely to dissipate until those excess savings run out.
Many hoped that when stimulus checks stopped arriving at the end of 2021, Americans would burn though their savings and start returning to work. But that is not happening. The Wall Street Journal reported this week that, according to the Bureau of Economic Analysis, U.S. families have tapped just $114 billion of the $2.7 trillion in excess pandemic savings so far. That means they have $2.586 trillion left — more than the amount in Biden’s American Rescue Plan. That fiscal cushion is keeping many workers out of the workforce.
What can be done? The first rule of holes is: When you are in one, stop digging. So, when you are in a hole of spiraling inflation, the obvious first step is: stop spending. Instead, Biden tried to follow his American Rescue Plan with a multitrillion-dollar Build Back Better social spending plan. Democrats are furious with Sens. Joe Manchin III, D-W.Va., and Kyrsten Sinema, D-Ariz., for killing Build Back Better, but the fact is, they may have saved Biden from even further disaster by doing so. As former Obama administration Treasury official Steven Rattner has pointed out, if they had allowed Biden’s plan to go through it “would make these [inflation] numbers look small.”
Inflation is a lot like a forest fire — once started, it’s really hard to put out. But instead of trying to tamp down the flames, Biden keeps trying to pour gasoline on the inferno, with more spending and more free money from Washington. It seems the only thing that will stop the fiscal pyromaniacs in the Democratic Party is losing control of Congress.
Marc Thiessen is a nationally syndicated columnist.