A few years ago some nutty professors came up with a crackpot idea called “modern monetary theory,” or MMT. It was the idea that as long as interest rates stay low, the U.S. government can spend and borrow trillions upon trillions of dollars at almost no cost and we will all be richer. This is a little like saying you can jump out of an airplane without a parachute and as long as you never hit the ground, you will be fine.
This looney idea was mostly ridiculed as a flat-earth-society idea — and yet now we have a president, Joe Biden, who actually is practicing MMT. His latest budget calls for $6 trillion in spending, soon to rise to $8 trillion, paid for with a $2 trillion tax hike on the rich and $7.6 trillion in additional debt. This is more debt than accumulated by the previous four presidents — combined.
The red ink is also on top of the some $5 trillion we spent to combat COVID-19. Now that the pandemic is over, a sane administration would be looking for ways to start to pay off some of that debt burden, which will grow to more than $150,000 per child born today. (And this from the same party that says it cares about the children.)
Seemingly everything the Biden administration does and spends money on in this budget manifesto is labeled an “investment.” Department of Education spending is an investment; so are child care expenses, paid parental leave, corporate welfare grants to wind and solar companies (many operating outside the United States), “environmental justice” grants, mass transit systems that few ride, aid to mismanaged blue states and cities, unemployment insurance bonuses that pay people more money not to work, ObamaCare subsidies, and on and on for 1,000 pages. Even the $30 billion that President Biden wants to spend to hire 75,000 more IRS agents is an investment.
What is dispiriting is that, despite the fattest government budget in world history, the two agencies that matter most to our national well-being — the Defense Department and the Department of Homeland Security — get virtually no increase at all. Nearly every penny goes for domestic social programs that are designed not to expand wealth, but to redistribute it.
In a perhaps temporary display of honesty, the Biden team predicts growth rates over the next decade of just 2 percent. For the last 40 years, average growth has been closer to 3 percent. Given that a lot of the growth in GDP is going to come directly from government spending, private-sector GDP is going to be closer to 1 or 1.5 percent per year. There is a term for this: secular stagnation. Two percent growth is treading water.
Also, to his credit, Biden doesn’t play this game of make-believe that somehow, somewhere in future years, we will have a balanced budget in Washington. No, the Biden budget forecasts tens of trillions of dollars of debt, presumably to infinity and beyond. In this Biden never-never land, there are no fiscal cliffs to tumble off.
What are the real-world pocketbook implications of a budget that recklessly raises spending levels every year with no plausible revenue source to pay for it all? More multi trillion-dollar levels of debt almost surely mean higher inflation and higher interest rates. So even if wages go up under Biden’s policies, it is quite probable that the inflation rate will outpace pay raises for workers and we will have declines in living standards for those at the bottom and in the middle of the income scale and for seniors living on fixed incomes.
It reminds me of the saying back in the bad old days of the 1970s under President Carter: “My take-home pay won’t take me home.”
With whiffs of inflation already turning into consumer sticker shock at the gas pump and cash register, Congress should be combating rising prices and the declining purchasing power of the dollar by whiting-out wasteful spending from the budget, not pumping it up.
Democrats dismiss any criticism from Republicans of Biden’s runaway borrowing strategy by pointing to large deficits under Presidents Trump and Bush — and that’s true. But Biden’s debt levels are two to three times higher. That’s at least twice as many bonds as we are going to need the Chinese to buy from us. (Ironically, I am often asked whether China will try to devalue the U.S. dollar so that the Chinese yuan becomes the new world currency. My response has always been: China can’t do that to us. We can only do it to ourselves.)
To stop this financial madness will require just ONE Democrat in the Senate to stand up for principle and prosperity over political party and say “No.” It’s time for a “have you no shame?” moment for the Democrats: Sen. Joe Manchin (D-W.Va.), Sen. Kyrsten Sinema (D-Ariz.) — are you out there? Now is the time for all good men and women to come to the aid of their country.
Stephen Moore is an economist with FreedomWorks and a cofounder of the Committee to Unleash Prosperity. He served as an economic adviser to President Trump.