The U.S. dollar will likely soon lose its status as the global reserve currency. The dollar’s global reserve dominance has declined in recent years. As a result,  international trade partners are hedging new connections. This will restructure the global economic order and create challenges ahead, especially for middle-class Americans.

Americans should know what’s happening and how they can prepare for this possibility. But first, what does it mean to be the world’s global reserve currency, and why does it matter? 

The U.S. Dollar is the dominant global reserve currency. It’s widely accepted and is the preferred medium of exchange for international transactions. The dollar has enjoyed this status for the past 80 years due to its strong reputation acquired across a long history of America’s rising military prowess, fulfilling its financial obligations, and maintaining a strong economy.

These institutional foundations of the dollar created high demand among foreign entities. One of the most important transactions utilizing the dollar is the purchase of oil. Oil is currently priced in dollars globally and other dollar-denominated assets. Losing or weakening the dollar’s position and value results in higher oil prices. 

The dollar’s elevated demand has helped keep its value high relative to other currencies. This prompted many countries to tie their currency directly to our dollar. The U.S. benefited by leveraging foreign demand for dollars into loans to the U.S. federal government. Foreign investors lend the U.S. high volumes of money because of the debt’s dollar denomination. 

The higher demand for U.S. Treasury securities pushes down domestic interest rates. This influences lower rates on mortgages and business loans, which help provide increased investment and economic growth. Losing or weakening the dollar’s reserve position will result in increased interest rates, decreased investment, and weak to negative economic growth. 

The dollar’s reserve status has also meant an increased volume of international trade. Ultimately, international trade helps keep interest rates and inflation moderately low. Losing or weakening the dollar’s reserve position will result in increased inflation. 

Trouble for the dollar is on the horizon. 

The once-givens about the dollar have come into question recently due prominently to excessive deficit spending. Foreign investors are reducing their demand for dollars as they diversify their portfolios. This combination contributed to the ballooning of the debt, depreciated the dollar, led to higher inflation and falling year-over-year real average weekly earnings for 25 straight months, and drove up interest rates, thereby slowing economic activity. 

Of course, this will have tradeoffs and many of them won’t be good.

As mentioned, the major tradeoffs will be higher inflation and interest rates. The latter will trigger a move by the Federal Reserve to attempt to lower interest rates. But if its target rate is held below what markets dictate, the Fed will monetize the debt, increase the money supply, and drive inflation higher. The long-term result will be even higher interest rates to tame inflation.

Unfortunately, the consequences of higher interest rates and inflation would be severe. People should expect higher mortgage rates than the already rising average rate of 6.4%. This is the highest in 15 years. Ultimately, higher interest rates would result in a steeper contraction in the housing market, exacerbate economic weakness, increase job losses, and worsen poverty.

But maybe more importantly, it would likely crush middle-class Americans and the lifestyle that they’ve been accustomed to having for decades. The higher cost of shelter, food, gasoline, and energy as the dollar loses its reserve currency status would wreck havoc on their budgets and force major decisions about what’s best for their families. This could mean having to put off saving for college, going on vacations, and living in much smaller homes. 

All because our government couldn’t spend our money wisely. Therefore, the government should take serious steps to restore confidence in the dollar before a bad situation for Americans becomes worse or irreconcilable.

To start, the federal government should reduce deficit spending. The long-term goal should be a balanced budget and an eventual start to paying down the debt. This will be pro-growth as the government stops redistributing taxpayer money from productive to unproductive activities. It will also strengthen the fiscal and economic situation of the U.S. The result will be an improvement in foreigners’ outlook on the dollar that would help preserve the dollar’s status.

Dollar-focused policies should be tied to reducing the money in circulation. This should occur as the Federal Reserve reduces its balance sheet. Doing so tames inflationary pressures and could even result in some disinflation. This would allow the hard-earned dollars of Americans to go further than they do today. 

These policy improvements should be put into law with fiscal and monetary policy rules. The rules should remove the discretion of big-government spenders and printers. This would enable people’s livelihoods to get back on track and improve for generations.    

The potential loss of the dollar’s reserve currency status could have significant economic consequences, and there are even more than highlighted here. There is, however, reason for optimism: The U.S. economy is resilient and adapts well to challenges. But will those in D.C. allow for that to happen in the dynamic marketplace? Time will tell. But let’s hope so before it’s too late for middle-class Americans and everyone else to have the opportunity to fulfill their hopes and dreams.

Originally published at The Daily Caller with Chuck Beauchamp, Ph.D.

​House Republicans have proposed a bill that would increase the debt ceiling but cut government spending. Biden has refused to negotiate the terms of the bill because of these cuts. Now U.S. Treasury Secretary Janet Yellen says the 14th Amendment could be invoked to declare the debt ceiling unconstitutional. This would enable the United States to avoid default but would lead to what Yellen calls a “constitutional crisis.” NTD spoke with Vance Ginn, senior fellow at Americans for Tax Reform, to learn more about the issue.

​Watch interview with NTD News here. 

Both Republicans and Democrats at the national level have put us down a path of slow growth, massive deficits, and high inflation. With a new Republican majority in the U.S. House and the daunting debt ceiling fight over the bloated $31.4 trillion national debt almost exclusively due to excessive spending, there’s a proven pro-growth, pro-liberty path.

In 2022, the U.S. had real GDP growth of just 0.9 percent (Q4-over-Q4), the highest inflation in 40 years, the highest mortgage rates in 20 years, and the worst stock market in 14 years. Average real weekly earnings have now declined year-over-year for 22 straight months. 

Fortunately, history is a good guide for how to overcome this mess. The two of us have served as chief economists at the Office of Management and Budget (OMB), though 50 years apart. One of us (Arthur Laffer, originator of the “Laffer Curve”) was the first chief economist of the OMB in the Nixon White House. The other (Vance Ginn) was the last associate director for economic policy at the OMB in the Trump White House.

While much has changed since the OMB was formed in 1970, the problems are basically the same today. There remains a lot of unjustifiable government spending, prosperity-killing taxes, unwarranted regulations, excessive liquidity, and harmful interference in international trade. But just because counterproductive economic policies have been around for a long time doesn’t mean we shouldn’t try for a better world. 

Each of the above areas is the subject of intense debate. In politics, these debates have their short-term winners and losers as judged by elections. But the principles of economics aren’t determined by votes. The remedy for economic malaise has been and is less government, not more. Free-market, pro-growth policies are the cure. 

The legacy of the 1970s is now called the era of stagflation, and the 2020s are shaping up to be known for the same, or worse. Even with 50 years of experience, many people still haven’t learned a lesson. 

During the Nixon and Ford administrations, the economy was stifled at every turn. The dollar was taken off gold and devalued, resulting in higher inflation. Then there was the imposition of wage and price controls, which did nothing to stop inflation but instead ravaged the economy. Government spending was out of control. Taxes were raised, and tariffs imposed, including a 10 percent import tax surcharge; such was the wisdom of the D.C. crowd. 

The consequences were rising inflation, stock market collapse, impeachment, and a weak economy. Then, President Jimmy Carter tried to do more of the same with the same consequences. 

There followed a true renaissance, led by President Ronald Reagan’s tax and regulatory cuts and Federal Reserve Chairman Paul Volcker’s sound monetary policy. Inflation crashed, the stock market soared, new jobs surged, and Reagan won re-election in a landslide, winning 49 states. 

And then there was the sad interlude of George H.W. Bush, who broke his promise by raising taxes, leading to a one-term presidency.

President Bill Clinton, partnering as he did with House Speaker Newt Gingrich, cut government spending by 3 percentage points of GDP, cut capital gains tax rates while exempting owner-occupied homes from this tax altogether, and finally, he and the Republicans pushed the North American Free Trade Agreement (NAFTA) through Congress. On the bad side, he raised the top two tax rates. But the spending restraint contributed to a budget surplus for four straight years. 

President George W. Bush, with a penchant for spending more and for temporary tax cuts, was followed by President Barack Obama, with a desire on steroids to spend even more, plus he nationalized health care. Stagnation took hold, and prosperity faded.

In his first two years, President Trump reversed some of the prior 16 years of bad policy with substantial tax cuts, historic deregulation, and other measures that helped get government out of the way, contributing to the lowest poverty rate and the highest real median household income on record. But with the onset of the pandemic, prosperity was cut short by the ill-advised massive spending increases and lockdowns.

Today, we’re once again mired in a sea of bad policies and bad consequences despite President Joe Biden’s self-serving narrative. With tax hikes, massive spending, oppressive energy regulations, soaring debt levels, trade protectionism, and a bloated Fed balance sheet, stagflation was given a brand-new lease on life.

We should follow the proven, pro-growth path (not currently taken) of sound money, minimal regulations, free trade, flat taxes, and most of all, spending restraint for the sake of the economy and human flourishing. It’s also great politics. With this elixir in hand, it would be springtime again in America. And that is something Americans can believe in.

Vance Ginn, Ph.D., is an economist and senior fellow at Young Americans for Liberty and previously served as the associate director for economic policy of the White House’s Office of Management and Budget from 2019 to 2020. Arthur Laffer, Ph.D., is an economist from Nashville, Tennessee, and was the first chief economist of the White House’s Office of Management and Budget.

Originally published at The Federalist. 

Key Point: The U.S. economy in 2022 had the slowest Q4-over-Q4 growth during a recovery since at least 2009 and average weekly earnings are now down for 22 straight months as inflation keeps roaring. But there’s hope if we just give free-market capitalism a chance to let people prosper. ​

Labor Market: The Bureau of Labor Statistic recently released its U.S. jobs report for January 2022. This report came with substantial revisions to seasonal adjustments and population estimates which could bias the data for a while given that the revised estimates include the much of the last three years of data that are highly volatile. And recall the recent report by the Philadelphia Fed finds that if you add up the jobs added in states in Q2:2022 there were just 10,500 net new jobs rather than more than 1 million reported.
 
The establishment survey shows there were +517,000 (+3.3%) net nonfarm jobs added in January to 155.1 million employees, with +443,000 (+3.6%) added in the private sector and +74,000 (+1.4%) jobs added in the government sector. Most of the private sector jobs were added in the sectors of leisure and hospitality (+128,000), private education and health services (+105,000), and professional and business services (+82,000), which these three sectors led over the last 12 months as well; information (-5,000) and utilities (-700) were the only net job declines over the last month and no sector had net job losses over the last year. Average hourly earnings for all employees was up by 10 cents last month to $33.03, or up by +4.4% over the last year. And average weekly earnings in the private sector increased by $13.35 last month to $1,146, or up by +4.7% over the 12 months.
 
The household survey had another large increase of +894,000 jobs added to 160.1 million employed There have been declines in net jobs in four of the last 10 months for a total increase of +1.8 million since March 2022, which is about half of the +3.6 million of the net jobs added per the establishment survey. The official U3 unemployment rate declined slightly to 3.4% which is the lowest since 1969.
 
But challenges remains as inflation-adjusted average weekly earnings were down -1.5% over the last year for the 22nd straight month, weighing on Americans budgets to make ends meet. And since February 2020 before the shutdown recession, the prime age (25-54 years old) employment-population ratio was 0.3-percentage point lower, prime-age labor force participation rate was 0.3-percentage point lower, and the total labor-force participation rate was 0.9-percentage-point lower with millions of people out of the labor force thereby holding the U3 unemployment rate much lower than otherwise.

​Economic Growth: The U.S. Bureau of Economic Analysis’ recently released the 2nd estimate for economic output for Q4:2022. The following table provides data over time for real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment. And most of the estimates for Q4:2022 and growth in 2022 were revised lower, providing more evidence that 2022 was a very weak year if not a recession.

​The shutdown recession in 2020 had GDP contract at historic annualized rates because of individual responses and government-imposed shutdowns related to the COVID-19 pandemic. Economic activity has had booms and busts thereafter because of inappropriately imposed government COVID-related restrictions in response to the pandemic and poor fiscal policies that severely hurt people’s ability to exchange and work.

Since 2021, the growth in nominal total GDP, measured in current dollars, was dominated by inflation, which distorts economic activity. The GDP implicit price deflator was +6.1% for Q4-over-Q4 2021, representing half of the +12.2% increase in nominal total GDP. This inflation measure was +9.1% in Q2:2022—the highest since Q1:1981—for a +8.5% increase in nominal total GDP that quarter. This made two consecutive declines in real total (and private) GDP, providing a criterion to date recessions every time since at least 1950. In Q3:2022, nominal total GDP was +7.6% and GDP inflation was +4.4% for the +3.2% increase in real total GDP. But if inflation had been as high as it was in the prior two quarters or had the contribution of net exports of goods and services (driven by natural gas exports to Europe) not been 2.9%, real total GDP would have either declined or been essentially flat for a third straight quarter.

In Q4:2022, there was a similar story of weakness as nominal total GDP was +6.6% and GDP inflation was +3.9% for the +2.7% increase in real total GDP. But if you consider the +2.7% real total GDP growth was driven by contributions of volatile inventories (+1.5pp), government spending (+0.6pp), and next exports (+0.5pp) which total +2.6pp, the actual growth is quite tepid like it was in Q3:2022. For all of 2022, real total GDP growth is reported +2.1% year-over-year but measured by Q4-over-Q4 the growth rate was only +0.9%, which was the slowest Q4-over-Q4 growth for a year since 2009 (last part of Great Recession).

The Atlanta Fed’s early GDPNow projection on February 24, 2023 for real total GDP growth in Q1:2023 was +2.7% based on the latest data available.

​The table above also shows the last expansion from June 2009 to February 2020. A reason for slower real private GDP growth in the latter period is due to higher deficit-spending, contributing to crowding-out of the productive private sector. Congress’ excessive spending thereafter led to a massive increase in the national debt by more than +$7 trillion that would have led to higher market interest rates. This is yet another example of how there is always an excessive government spending problem as noted in the following figure with federal spending and tax receipts as a share of GDP no matter if there are higher or lower tax rates. 

​But the Fed monetized much of the new debt to keep rates artificially lower thereby creating higher inflation as there has been too much money chasing too few goods and services as production has been overregulated and overtaxed and workers have been given too many handouts. The Fed’s balance sheet exploded from about $4 trillion, when it was already bloated after the Great Recession, to nearly $9 trillion and is down only about 6.5% since the record high in April 2022. The Fed will need to cut its balance sheet (see first figure below with total assets over time) more aggressively if it is to stop manipulating so many markets (see second figure with types of assets on its balance sheet) and persistently tame inflation, which there’s likely a need for deflation for a while given the rampant inflation over the last two years. 

​The resulting inflation measured by the consumer price index (CPI) has cooled some from the peak of +9.1% in June 2022 but remains hot at +6.4% in January 2023 over the last year, which remains at a 40-year high (highest since July 1982) along with other key measures of inflation (see figure below). After adjusting total earnings in the private sector for CPI inflation, real total earnings are up by only +2.2% since February 2020 as the shutdown recession took a huge hit on total earnings and then higher inflation hindered increased purchasing power. 

​Just as inflation is always and everywhere a monetary phenomenon, deficits and taxes are always and everywhere a spending problem. The figure below (h/t David Boaz at Cato Institute) shows how this problem is from both Republicans and Democrats. 

​As the federal debt far exceeds U.S. GDP, and President Biden proposed an irresponsible FY23 budget and Congress never passed one until the ridiculous $1.7 trillion omnibus in December, America needs a fiscal rule like the Responsible American Budget (RAB) with a maximum spending limit based on population growth plus inflation. If Congress had followed this approach from 2003 to 2022, the figure below shows tax receipts, spending, and spending adjusted for only population growth plus chained-CPI inflation. Instead of an (updated) $19.0 trillion national debt increase, there could have been only a $500 billion debt increase for a $18.5 trillion swing in a positive direction that would have substantially reduced the cost of this debt to Americans. Of course, part of this includes the Great Recession and the Shutdown Recession, so these periods would have likely been good reason to exceed the limit, but regardless we would be in a much better fiscal and economic situation with this fiscal rule. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2023 “Blueprint to Save America.” And to top this off, the Federal Reserve should follow a monetary rule so that the costly discretion stops creating booms and busts.

​Bottom Line: While there appears to be a strengthening labor market in January, let’s see if this continues as my guess is that these were biased from the data adjustments, and we will see a weaker labor market in the months to come. My expectation is that stagflation will continue along with the a deeper recession this year given the “zombie economy” with “zombie labor” of many workers sitting on the sidelines and others are “quiet quitting” along with the failures of many “zombie firms” that live on debt. Ultimately, Americans are struggling from bad policies out of D.C.. Instead of passing massive spending bills, the path forward should include pro-growth policies. These policies ought to be similar to those that supported historic prosperity from 2017 to 2019 that get government out of the way rather than the progressive policies of more spending, regulating, and taxing. The time is now for limited government with sound fiscal and monetary policy that provides more opportunities for people to work and have more paths out of poverty.
 
Recommendations:

• Set a pro-growth policy path with less spending, regulating, and taxing at all levels of government.
• Reject new spending packages that America cannot afford nor needs; pass the RAB instead.
• Impose strict monetary rule with the Fed having a much smaller balance sheet and a much higher federal funds rate target until we End the Fed.
• Enact return-to-work policies.

​Key Point: Americans are suffering under big-government policies as average weekly earnings adjusted for inflation are down for 21 straight months. It's time for pro-growth policies to unleash economic potential to let people prosper.  

​Overview: The irresponsible “shutdown recession” and subsequent government failures have led to a longer, deeper recession with high inflation that are having persistent consequences for many Americans’ livelihoods. This includes excessive federal spending redistributing scarce private sector resources with deficit spending of more than $7 trillion since January 2020 to reach the new high of $31.4 trillion in national debt—about $95,000 owed per American or $250,000 owed per taxpayer. This new debt has hit its limit and needs to be addressed with spending restraint as the Federal Reserve monetized most of the new debt, leading to a 40-year-high inflation rates. The failed policies of the Biden administration, Congress, and the Fed must be replaced with a liberty-preserving, free-market, pro-growth approach by the new majority by House Republicans so there are more opportunities to let people prosper.  

​Labor Market: The U.S. Bureau of Labor Statistics recently released the U.S. jobs report for December 2022. The BLS’s establishment report shows there were 223,000 net nonfarm jobs added last month, with 220,000 added in the private sector. Interestingly, while there have appeared to be a relatively robust number of jobs created, a recent report by the Philadelphia Fed find that if you add up the jobs added in states in Q2:2022 there were just 10,500 net new jobs rather than more than 1 million initially estimated. This further indicates that the recession started in (likely) March 2022 (more on this below).
 
That expected revision to the establishment report supports the weak data in the BLS’s household survey, which employment increased by 717,000 jobs last month but had declined in four of the last nine months for a total increase of 916,000 jobs since March 2022. This number of net jobs added since then is much lower than the report 2.9 million payroll jobs in the establishment. The official U3 unemployment rate declined slightly to 3.5%, but challenges remain, including: 3.1% decline in average weekly earnings (inflation-adjusted) over the last year, 0.4-percentage point lower prime-age (25–54 years old) employment-population ratio than in February 2020, 0.6-percentage point below prime-age labor force participation rate, and 1.0-percentage-point lower total labor-force participation rate with millions of people out of the labor force. 

​These data support my warnings for months of stagflation, recession, and a “zombie economy.” This includes “zombie labor” as many workers are sitting on the sidelines and others are “quiet quitting” while there’s a declining number of unfilled jobs than unemployed people to 4.5 million And that demand for labor is likely inflated from many “zombie firms,” which run on debt and could make up at least 20% of the stock market and will likely lay off workers with rising debt costs. 

Economic Growth: The U.S. Bureau of Economic Analysis’ released economic output data for Q4:2022. The following provides data for real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment.

​The shutdown recession in 2020 had GDP contract at historic annualized rates because of individual responses and government-imposed shutdowns related to the COVID-19 pandemic. Economic activity has had booms and busts thereafter because of inappropriately imposed government COVID-related restrictions in response to the pandemic and poor fiscal policies that severely hurt people’s ability to exchange and work.

Since 2021, the growth in nominal total GDP, measured in current dollars, was dominated by inflation, which distorts economic activity. The GDP implicit price deflator was +6.1% for Q4-over-Q4 2021, representing half of the +12.2% increase in nominal total GDP. This inflation measure was +9.1% in Q2:2022—the highest since Q1:1981—for a +8.5% increase in nominal total GDP that quarter. This made two consecutive declines in real total (and private) GDP, providing a criterion to date recessions every time since at least 1950. In Q3:2022, nominal total GDP was +7.6% and GDP inflation was +4.4% for the +3.2% increase in real total GDP. But if inflation had been as high as it was in the prior two quarters or had the contribution of net exports of goods and services (driven by natural gas exports to Europe) not been 2.9%, real total GDP would have either declined or been essentially flat for a third straight quarter.

​In Q4:2022, there was a similar story of weaknesses as nominal total GDP was +6.4% and GDP inflation was +3.5% for the +2.9% increase in real total GDP. But if you consider the +2.9% real total GDP growth was driven by contributions of volatile inventories (+1.5pp), government spending (+0.6pp), and next exports (+0.6pp) which total +2.7pp, the actual growth is quite tepid. For all of 2022, real total GDP growth is reported +2.1% year-over-year but measured by Q4-over-Q4 the growth rate was only +0.96%, which was the slowest Q4-over-Q4 growth for a year since 2009 (last part of Great Recession).

The Atlanta Fed’s early GDPNow projection on January 27, 2023 for real total GDP growth in Q1:2023 was +0.7% based on the latest data available.
​
The table above also shows the last expansion from June 2009 to February 2020. The earlier part of the expansion had slower real total GDP growth but had faster real private GDP growth. A reason for this difference is higher deficit-spending in the latter period, contributing to crowding-out of the productive private sector. Congress’ excessive spending thereafter led to a massive increase in the national debt that would have led to higher market interest rates. This is yet another example of how there is always an excessive government spending problem as noted in the following figure with federal spending and tax receipts as a share of GDP. 

​But the Fed monetized much of it to keep rates artificially lower thereby creating higher inflation as there has been too much money chasing too few goods and services as production has been overregulated and overtaxed and workers have been given too many handouts. The Fed’s balance sheet exploded from about $4 trillion, when it was already bloated after the Great Recession, to nearly $9 trillion and is down only about 6% since the record high in April 2022. The Fed will need to cut its balance sheet (see first figure below with total assets over time) more aggressively if it is to stop manipulating so many markets (see second figure with types of assets on its balance sheet) and persistently tame inflation. 

​The resulting inflation measured by the consumer price index (CPI) has cooled some from the peak of 9.1% in June 2022 but remains hot at 6.5% in December 2022 over the last year, which remains at a 40-year high (highest since June 1982) along with other key measures of inflation (see figure below). After adjusting total earnings in the private sector for CPI inflation, real total earnings are up by only 1.1% since February 2020 as the shutdown recession took a huge hit on total earnings and then higher inflation hindered increased purchasing power. 

​Just as inflation is always and everywhere a monetary phenomenon, high deficits and taxes are always and everywhere a spending problem. The figure below (h/t David Boaz at Cato Institute) shows how this problem is from both Republicans and Democrats. 

​As the federal debt far exceeds U.S. GDP, and President Biden proposed an irresponsible FY23 budget and Congress never passed one until the ridiculous $1.7 trillion omnibus in December, America needs a fiscal rule like the Responsible American Budget (RAB) with a maximum spending limit based on population growth plus inflation. If Congress had followed this approach from 2002 to 2021, the (updated) $17.7 trillion national debt increase would instead have been a $1.1 trillion decrease (i.e., surplus) for a $18.8 trillion swing to the positive that would have reduced the cost to Americans. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2023 “Blueprint to Save America.” And the Federal Reserve should follow a monetary rule.

​Bottom Line: Americans are struggling from bad policies out of D.C., which have resulted in a recession with high inflation. Instead of passing massive spending bills, like passage of the “Inflation Reduction Act” that will result in higher taxes, more inflation, and deeper recession, the path forward should include pro-growth policies. These policies ought to be similar to those that supported historic prosperity from 2017 to 2019 that get government out of the way rather than the progressive policies of more spending, regulating, and taxing. The time is now for limited government with sound fiscal and monetary policy that provides more opportunities for people to work and have more paths out of poverty.
 
Recommendations:

• Set a pro-growth policy path with less spending, regulating, and taxing at all levels of government.
• Reject new spending packages that America cannot afford nor needs; pass a fiscal rule like the RAB instead.
• Impose monetary rule with the Fed having a much smaller balance sheet and a much higher federal funds rate target until we End the Fed.
• Enact return-to-work policies.
  

With U.S. prices higher than expected in all areas including food, shelter, and gas, the Biden administration’s student debt relief plan is really a “redistribution scheme” that will further fuel inflation, according to Vance Ginn, economist and founder of Ginn Economic Consulting.

The plan is “what I’ve really been calling a redistribution scheme from those who didn’t go to college and don’t have student loans to everyone who has student loans. Only about 33 percent of Americans have graduated with a bachelor’s degree,” Ginn said during a Sept. 14 interview with the NTD TV News Today program.  “This is a huge shift in the amount of money that people are paying and … it also fuels more inflation.”

The Biden-Harris administration, in order to advance their “equity” agenda, released a plan which will cancel $10,000 of debt for people earning less than $125,000, cap monthly payments at five percent of a borrower’s monthly earnings, forgive loan amounts of $12,000 or less after 10 years of payments, and mandate that the federal government cover the unpaid interest for those in the low-income bracket.

President Joe Biden praised the debt relief plan, which he said was designed to help those that don’t have “family wealth,” including black and Hispanic students.

“They don’t own their homes to borrow against to be able to pay for college,” Biden said at a press briefing at the White House on Aug. 25.

When asked if this action was fair to those students who had paid off their student loans, Biden shifted the topic to billionaires.

“Is it fair to people who in fact do not own a multibillion-dollar business if they see one of these guys give them all a tax break? Is that fair? What do you think?” Biden asked.

And while Democrats celebrated the “Inflation Reduction Act” legislation at the White House on Sept. 13,  Ginn criticized the spending bill and the current state of the economy.

“I don’t know how you can celebrate an 8.3 percent [annual] inflation rate and interest rates soaring,” he said.  

However, Biden touted the legislation as being able to reduce the gross national debt of more than $30 trillion by $300 billion.

“This bill will lower the deficit. This bill alone is going to lower the deficit by $300 billion over the next decade,” said Biden during a speech about the new law on Sept. 13 at the White House. “So, I don’t want to hear it anymore about ‘big spending Democrats.’ We spend, but we pay.”

Contrary to what Biden says, Ginn said inflation in large part is caused by congressional overspending, which increases the national debt, leading the Federal Reserve to print more money that goes into circulation, and creating a situation as we see now where there is too much money chasing too few goods.

Ginn said although gas prices have decreased somewhat recently, they are still 25 percent higher than the year-over-year increase and overall inflation is at a 40-year high. In addition, “people’s wages are not keeping up with inflation. In fact, if you adjust for inflation, wages are down 3.4 percent,” he said.

Ginn’s advice to Americans is to save money in order to be prepared for future price increases.

Originally posted at Epoch Times

​The economic shock from the shutdowns in response to the COVID-19 pandemic were unprecedented. Never had state governors imposed stay-at-home orders that cut people off from their lives and livelihoods. Those costly policies were bad enough, but then came historic increases in deficit spending and money creation.

While these may have been well-intentioned policies early on, their repercussions—amplified by misguided macroeconomic policy since January 2021—continue to plague many Americans. The antidote is pro-growth policies.

There was a vibrant economy on the eve of this shock. In fact, about three quarters of the flows of people into employment were Americans returning to the workforce—the highest on record.

For context, 2.3 million prime-age Americans—people between the ages of 25 and 54—returned to the labor force during Trump, after 1.6 million left during the Obama recovery. This happened with a robust private sector providing many opportunities because the Trump administration focused on removing barriers by getting the Tax Cuts and Jobs Act of 2017 through Congress and providing substantial, sensible deregulation.

We often hear that these tax cuts were “trickle-down economics” or “tax cuts for the rich and big business.” But the change in real (inflation-adjusted) wages was positive across the income spectrum. The bottom 10% of the wage distribution rose by 10% while the top 10% rose half as fast. And real wealth for the bottom 50% increased by 28%, while that of the top 1% increased by just 9%.

The results show those tax cuts weren’t designed for the “rich.”

In 2019, the real median household income hit a record high, and the poverty rate reached a record low. Poverty rates fell to the lowest on record for Blacks and Hispanics, and child poverty fell to 14.4%—a nearly 50-year low. Clearly, Americans were doing well across the board, especially those who had historically been left behind.

These stellar results were from reducing barriers by government in people’s lives—a stark contrast to what happened by state governments during the pandemic and exacerbated thereafter by Biden’s big-government policies.

While there were similar spending bills passed into law during both administrations, it’s comparing apples and oranges.

Trump supported congressional efforts in March and April 2020 when huge swaths of the economy were shut down, 22 million Americans were laid off, and 70% of the economy faced collapse. In contrast, Biden substantially increased regulations immediately and passed a nearly $2 trillion spending bill in March 2021—an amount equal to approximately 10% of the U.S. economy, at a moment when the U.S. economy was already 10 months into recovery.

Another difference was that Trump introduced sunsets for emergency pandemic provisions so that they would expire. But Biden continued and expanded many of them, increasing dependency on government.

Through March 2022, employment is back up 20.4 million but remains 1.6 million below the peak in February 2020. While Biden touts the most jobs gained in one year in 2021, more jobs were recovered in just the two months of May and June 2020 than in all 12 months of 2021, and nearly two-thirds of this jobs recovery was during Trump. Moreover, job gains of 6.7 million in 2021 were far less than the glorified projections coming from the White House of around 10 million.

Just think if Biden had practiced the pro-growth policies of Trump.

Instead, inflation is at a 40-year high and looks to continue to soar, fueled by a host of self-imposed costly policies in Washington.

This includes Biden’s over-regulating of the oil and gas sector, massive unnecessary spending bills, and attempts to drastically raise taxes. And the Federal Reserve has more than doubled its balance sheet over the last two years, purchasing a majority of the $6 trillion increased national debt in that period, which is a 25% increase to $30 trillion.

These policies, which simultaneously boost demand while constraining supply, have brought the prospect of stagflation—high inflation and low growth—back for the first time since the late 1970s.

Rather than directly addressing the crisis, Biden has consistently deflected the issue by first doubting the reality of inflation to now falsely blaming it on corporate greed or Russian President Vladimir Putin. But the causes and consequences fall at his feet.

It’s time to return to the proven, pro-growth policies that worked during the Trump administration, along with an essential missing factor then of spending restraint by Congress. Doing so will provide a solid foundation for more opportunities to let people prosper.

This commentary was based on the remarks by Mr. Ginn and Mr. Goodspeed on a panel at the Texas Public Policy Foundation’s 2022 Policy Orientation.

https://www.texaspolicy.com/biden-should-pivot-to-trumps-pro-growth-policies/

Watching the screen on a gas pump while filling your vehicle’s tank is liable to induce a panic attack. Paying for a used car almost requires taking out a second mortgage. Speaking of mortgages, members of the middle class are being priced out of the housing market as home prices march relentlessly upward. Many price increases are out of control.

How did we get here? A little over a year ago, and in the years before the Covid-19 pandemic, most prices were relatively stable. But more recently, general price inflation is at a 40-year high.

The late economist Milton Friedman helped explain the inflation and stagflation of the 1970s. His explanation helped shape the strong economic recovery of the 1980s, built on the principles of limited government, with sound monetary policy that resulted in a steep decline in what had been rampant, double-digit inflation.

Inflation Is a Monetary Phenomenon

Friedman pointed out that “inflation is always and everywhere a monetary phenomenon.” The seemingly force majeure is actually a manmade problem, caused by the Federal Reserve (Fed) creating too much money. These principles of money and inflation aren’t new.

But those lessons are being disregarded by some in the economics profession. People like Stephanie Kelton have been promoting Modern Monetary Theory (MMT), which is virtually a complete reversal of what Friedman espoused and history demonstrated. This theory contends that the federal government’s current deficit spending isn’t an issue — it can, and should, be solved by the Fed creating money to fund it without concern about inflation as long as the U.S. dollar is the world’s reserve currency.

President Joe Biden has not openly endorsed MMT, but he’s no fan of Friedman either. Instead, he seems content to have many mostly younger congressional Democrats advocate for MMT, which provides convenient and seemingly academic reasoning for financing more federal spending without explicitly raising taxes. It has a similar political appeal that Keynesianism presented almost a century ago, and MMT is just as flawed.

But proponents of MMT do get one thing correct — the Fed can create money to service the debt and avoid a default. But in real terms, meaning adjusting for inflation, this assertion is false. Creating money to service the debt devalues the currency. Investors then receive a lower real return on their holdings of federal debt.

Furthermore, everyone is hurt by inflation, whether they own government bonds or not. Inflation is essentially a tax, as it robs people of their purchasing power at no fault of their own. Everyone who received a 7.5 percent raise over the last year probably thought they would be able to afford more stuff, but they were deceived. Inflation rose just as much — so there was no real raise.

False Claims That Taxes Are the Solution

But MMT proponents claim that the massive budget deficits are what allow people to save money. Were it not for those deficits, they contend, people would have no cash to save. At first glance, the pandemic seemed to support that. People received transfer payments from the government and saved much of them due to uncertainty. But more recently, people’s savings are being depleted as this dependency on government dries up and prices soar.

Now that inflation is running amok, MMT adherents believe tax increases are the primary (if not only) cure. They claim inflation is not caused by the Fed creating too much money, but by people having too much money to spend; taxation will remove that excess liquidity and stop inflation.

However, MMT doesn’t explain why it’s only inflationary when people spend money, but not when the government spends it. Somehow the Fed creating money by purchasing government debt miraculously doesn’t bid up prices for scarce resources. The theory sounds more like a belief than science — something that must be trusted rather than demonstrated.

Specifically, MMT ideology is built on mathematical relationships between economic variables like private and public savings and debt rather than a strong theoretical construct, and breaks down quickly when analyzed with sound economic theory. Moreover, these relationships seem to be used to derive a funding mechanism for their big-government policy goals, such as a federal jobs guarantee, universal healthcare, and other costly initiatives.

How Taxation Might Stop Inflation

But MMT is not entirely wrong on using taxation to stop inflation. If those taxes are used to pay for deficit spending — which really should be done by spending less — rather than the Fed financing it, then higher taxes can lower inflation. But that is far too nuanced of an explanation for MMT, which paints in much broader brushstrokes.

Regardless, MMT cannot dispel the hard truths of monetary policy, which is inflation comes from one place — the Fed. When the Fed creates money faster than the real economy grows, prices will rise; it’s that simple.

To alleviate the uncertainty and distortions across the economy of bad policies in Washington, there should be binding fiscal and monetary rules based on sound economics instead of ideology. This should include changing government spending by less than the growth in personal incomes and only changing the money supply to keep prices stable.

Almost two years after President Biden declared “Milton Friedman isn’t running the show anymore,” the late economist is clearly the one with the last laugh. Perhaps next time, the president will think twice before speaking ill of the dead.

https://www.texaspolicy.com/the-real-cause-of-inflation-is-insane-government-spending/

​Government spending is at the heart of sound public policy. But out-of-control spending for decades has created substantial economic destruction and ongoing threats that must be remedied before things get worse. Fortunately, we have examples of how fiscal rules can solve this problem. We must put these rules into place before our economy gets any worse.

Excessive federal government spending has created mounting budget deficits that have driven the national debt to $30 trillion. This debt has given the Federal Reserve ammunition to use to excessively print money, resulting in the highest inflation in 40 years. And inflation destroys our purchasing power as it is a hidden tax that erodes our livelihood.

Controlling spending takes discipline, and applying fiscal rules can help.

Policymakers should follow the examples a century ago of Presidents Warren G. Harding and Calvin Coolidge, who demonstrated that controlling spending and cutting the debt is possible.

President Harding assumed office in 1921 when nation was suffering an overlooked severe economic depression. Hampering growth were high income tax rates and a large national debt after WWI. Congress passed the Budget and Accounting Act of 1921 to reform the budget process, which also created the Bureau of the Budget (BOB) at the U.S. Treasury Department (which was changed in 1970 to the Office of Management and Budget in the Executive Office of the President). President Harding’s chief economic policy was to rein in spending, reduce tax rates, and pay down debt. Harding, and later Coolidge, understood that any meaningful cuts in taxes and debt couldn’t happen without reducing spending.

Charles G. Dawes was selected by Harding to serve as the first BOB Director. Dawes shared the Harding and Coolidge view of “economy in government.” In fulfilling Harding’s goal of reducing expenditures, Dawes understood the difficulty in cutting government spending as he described the task as similar to “having a toothpick with which to tunnel Pike’s Peak.”

To meet the objectives of spending relief, the Harding administration held a series of meetings under the Business Organization of the Government (BOG) to make its objectives known.

“The present administration is committed to a period of economy in government…There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures…We want to reverse things,” explained Harding.

Not only was Harding successful in this first endeavor to reduce government expenditures, his efforts resulted in “over $1.5 billion less than actual expenditures for the year 1921.”  Dawes stated: “One cannot successfully preach economy without practicing it. Of the appropriation of $225,000, we spent only $120,313.54 in the year’s work. We took our own medicine.”

Overall Harding achieved a significant reduction in spending. “Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922,” noted Jim Powell, a Senior Fellow at CATO Institute. Harding and the Republican Party viewed a balanced budget as not only good for the economy, but also as a moral virtue.

Dawes’s successor was Herbert M. Lord, and just as with the Harding Administration, the BOG meetings were still held on a regular basis. President Coolidge and Director Lord met regularly to ensure their goal of cutting spending was achieved.

Coolidge emphasized the need to continue reducing expenditures and tax rates. He regarded “a good budget as among the most noblest monuments of virtue.” Coolidge noted that a purpose of government was “securing greater efficiency in government by the application of the principles of the constructive economy, in order that there may be a reduction of the burden of taxation now borne by the American people. The object sought is not merely a cutting down of public expenditures. That is only the means. Tax reduction is the end.”

“Government extravagance is not only contrary to the whole teaching of our Constitution, but violates the fundamental conceptions and the very genius of American institutions,” stated Coolidge.

When Coolidge assumed office after the death of Harding in August 1923, the federal budget was $3.14 billion and by 1928 when he left, the budget was $2.96 billion.

Altogether, spending and taxes were cut in about half during the 1920s, leading to budget surpluses throughout the decade that helped cut the national debt.

The decade had started in depression and by 1923 the national economy was booming with low unemployment. If this conservative budgeting approach—which was tied with sound monetary policy for most of the period—had been continued, the Great Depression wouldn’t have happened.

Officials at every level of government today should learn from this extraordinary lesson that fiscal restraint supports more economic activity as more money stays in the productive private sector.

With spending out of control at the federal level and in many states and local governments, the time is now for spending restraint and strong fiscal rules to set the stage for more economic prosperity today and for generations to come.

https://www.texaspolicy.com/learning-from-the-champions-of-fiscal-conservatism/

​We were promised job growth—after all, that was the main selling point for the March 2021 American Rescue Plan Act (ARPA) from President Biden and the congressional Democrats. Promise made—promise broken.

In February 2021, the Congressional Budget Office (CBO) issued its economic outlook and projected 6.252 million jobs would be added in 2021 without ARPA. The White House then projected ARPA would add 4 million additional jobs for a total of 10.252 million more jobs in 2021.

ARPA was said to be necessary for the labor market recovery. Without it, job growth would slow, but with it, job growth would blossom. ARPA promised to get Americans back to work, get COVID-19 under control, and return the country to normal.

None of this happened.

According to the U.S. Department of Labor, the economy added just 6.116 million jobs in 2021, 136,000 fewer jobs than the CBO estimated without ARPA. At a cost of $1.9 trillion, ARPA was expensive from the start as it was added to an already bloated national debt. Now it appears the law added no jobs to the economy, and possibly cost jobs. It was not just expensive, it was also a detriment to the recovery.

The marketing behind ARPA was nothing new; many spending bills have been sold to the American people as stimulus measures. But labeling government spending as “stimulus” is a misnomer. When the government spends money, it usually only stimulates more government, not productive activity in the private sector.

This is partly because the government has no money of its own and it must get resources from the private sector before it can spend or redistribute them. That means any government spending has a cost which is often ignored by political pundits—but must be paid for all the same.

Whether government spending is financed through taxes, borrowing, or inflation, it represents a burden on the private sector. Whatever alleged benefits are to be derived from government spending must be weighed against the cost of first acquiring the resources needed for that spending.

The more government spends, the greater the burden on Americans.

This was evident in the 2008-09 Great Recession and the slow recovery that followed. Despite record spending by the federal government (once again called stimulus), the economy recovered at the slowest pace since the Great Depression of the 1930s. While total output lagged, employment lagged even more when compared to other recessions.

The labor market has now bogged down again.

Despite 10.6 million job openings, the economy is still missing 3.6 million jobs as compared to before the pandemic and there are still 6.3 million people unemployed.

Instead of supercharging the labor market recovery, trillions of borrowed dollars in new spending are hindering it. Because of direct cash payments, welfare expansions, unemployment “bonuses,” and other government transfer payments, many people are rationally choosing not to return to work. And while some of these programs have expired, their costly effects on people and the federal budget persist.

On top of those pressures, exaggerated fears of the omicron variant along with mixed messaging from government health officials have made some people afraid to go back to work. Other people, particularly in the health care industry, have been hesitant to take a COVID-19 vaccine and have consequently been forced out of their jobs because of ill-advised mandates.

The common factor in these examples is bad policy on the part of the government. Whether it is excessive regulation or spending, these public sector mistakes impact people’s lives in a very real—and negative—way.

ARPA failed to deliver on its promise of growing jobs and instead grew government, especially government debt, which now stands at a mind-boggling nearly $30 trillion, far exceeding the entire U.S. economy.

That debt is like an anchor weighing down future economic growth because it constantly requires interest payments, which sap the nation’s economic growth, meaning fewer jobs and less income. In FY 2021, taxpayers funded the second highest interest payment on the national debt—to the tune of a whopping $562 billion, with no end in sight.

ARPA is just the latest in a long line of massive government spending programs that were billed as stimulus for the economy, but only stimulated more government. That is something to keep in mind the next time Washington promises us more jobs.

https://www.texaspolicy.com/government-stimulus-didnt-stimulate-job-growth/

President Biden and Congressional Democrats have proposed roughly $6 trillion in new spending over a decade of hard-earned taxpayer dollars. To put this into perspective, this exceeds the economic output of every country except the U.S. and China, matches the $6 trillion authorized for COVID-related items since the pandemic—with nearly $1.5 trillion unspent—and exceeds the annual federal baseline budget of $4.8 trillion.
To put it bluntly, this reckless spending will destroy America’s fiscal and economic institutions by pushing us toward insolvency, dependency, and insanity.
The first proposal that the Senate, with some Republican support, recently passed a motion to proceed on is a mostly a progressive wish list of spending. It’s $1.2 trillion on “infrastructure,” with an unfunded $550 billion of it being new spending as the rest are funds previously authorized but not yet spent.
But it has just $110 billion, or less than 10%, for what’s historically been considered infrastructure—roads and bridges. The other 90% is to fund mass transit waste, green energy nonsense, and more items that the states or the private sector could do.
This first proposal should die or at least be cut down to actual infrastructure projects.
The second proposal is a reconciliation package deemed as “human infrastructure” at an astronomical cost of likely $5 trillion over a decade (with little backing documentation on what human infrastructure is).
This proposal will not only dramatically expand the federal government’s role in everyday American life but will contribute to stagflation not seen since the 1970s. It would fundamentally expand people’s dependency on the federal government and destroy the potential of Americans.
Here’s how it spends money we don’t have and turns America into something she is not.
Authorizing Runaway Government Spending

• Congress has already authorized almost $6 trillion in new spending, allegedly due to Covid-19, and executive actions by the Trump and Biden administration has authorized almost $1 trillion
• As a result, the federal deficit tripled to $3.1 trillion in 2020 and is expected to be in the same ballpark this year.
• Instead, we need less spending in the short term and a spending limit imposed based on the Foundation’s Responsible American Budget.

Raising Taxes

• Raising taxes on corporations and investment by $3.5 trillion will decrease our global competitiveness, decrease investment in America and result in less economic growth, fewer jobs, slower wage growth, and higher taxes on many Americans. Despite Biden’s promise to not raise taxes on those earning less than $400,000 a year, this proposal will raise their burden both directly and indirectly, especially for low-income earners.
• These taxes disincentivize saving and investment so much that some tax increases will result in less tax receipts.
• Instead, faster economic growth, more job creation, and faster wage growth can be achieved by reducing taxes and spending.

Driving Higher Inflation

• The general level of prices (CPI) rose 4% over the last year—the largest 12-month increase since August 2008. Meanwhile, real wages fell 1.7% indicating that consumers are worse off.
• More government spending when the Federal Reserve has already doubled its balance sheet and is purchasing over a trillion dollars a year in Treasury bonds will exacerbate existing inflationary pressures and make things even worse.
• Instead, there should be strict fiscal and monetary rules to return to policy normalcy.

Disincentivizing Work

• Much of the newly printed money has subsidized the unemployed, giving the average family of four more than $109,000 in government assistance through September 2021.
• In 19 states, a family of four can currently receive the equivalent of over $100,000 in salary with no one working. Some in Congress want to further expand these handouts and make them permanent, but this will redistribute more from the private sector and trap many people in a cycle of dependency.
• Instead, we must stop disincentivizing work by not extending the federal enhanced unemployment payments and by not making permanent the enhanced child tax credit.

Interfering with Health Care

• The package imposes socialist price controls on prescription drugs which will reduce the number of new drugs introduced into the U.S. market.
• Congress already expanded costly Obamacare subsidies in the last 18 months and expanded Medicaid through emergency powers, and now it plans to expand Medicare. That’s despite Medicare Part A being on track to become insolvent by around 2024.
• Instead, we should increase price transparency, remove unnecessary regulations on prescription drugs, and use alternatives like direct primary care to provide better health outcomes at a lower cost.

Pushing the Green New Deal

• The plan aims to cut total U.S. carbon emissions in half by 2030 and to have 80% of the nation’s electricity come from zero-emission energy sources.
• Fossil fuels currently provide 60% of U.S. electricity, with another 20% coming from nuclear. Completely eliminating fossil fuels from electricity generation by 2030 would reduce global temperatures in 2100 by an immeasurable 042 degrees Celsius.
• Instead, these efforts should be trashed, and an all-of-the-above energy production strategy should be supported that removes obstacles to innovation and adaption.

“Free” Community College

• Tuition at community colleges is relatively low and programs like federal Pell Grants are already available to those who cannot immediately afford the tuition.
• Subsidizing community colleges further will only make these schools more inefficient, just as federal funding for other tertiary schools has caused their costs to explode, especially at the administrative level.
• Instead, students should find paths that best meet their unique needs and that meet the skills demanded by employers. This includes career and technical education along with apprenticeships that typically don’t burden students with debt without job opportunities.

Ultimately, these big-government, green-energy boondoggle, dependency-inducing, tax-and-spend proposals coming out of D.C. should be rejected; They will weaken families, destroy jobs, and hurt our future. Instead, Congress should focus on removing obstacles hindering opportunities for Americans to flourish.

Commentary

​The Texas Public Policy Foundation’s Chief Economist Vance Ginn and economist E.J. Antoni break down the massive spending proposals in President Biden’s recent address to Congress.

$225 billion toward high-quality childcare and ensuring families pay only a portion of their income toward child-care services, based on a sliding scale

Raising taxes from one pocket to put money in the other is just shuffling dollars. The subsidies will also increase the overall cost of child care for those who need it.

$225 billion to create a national comprehensive paid family and medical leave program

Americans should be free to negotiate compensation packages like paid leave as they see fit; it shouldn’t be dictated by a bureaucrat. The consequence of a government-mandated paid family and medical leave will be lower wages and less opportunities for those with less skill and experience.

 $200 billion for free universal preschool for all 3- and 4-year-olds, offered through a national partnership with states

Parents want valuable schooling options for their kids, especially during critical years of early development, not rhetorical fallacies that something is free. Instead of creating another spendthrift program with a profligate bureaucracy behind it that will reduce the quality of preschool like government has to K-12 education, government should focus on removing imposed barriers of high taxes and marriage penalties that reduce parents’ resources to meet their child’s unique needs.

 $109 billion toward ensuring two years of free community college for all students

College, including community college, is not always the right fit. Some people enter trade or technical schools or begin their careers right after high school. This is especially true among those with lower lifetime earnings. “Free” college programs just take tax money from those with lower earnings to pay for the tuition of those who will likely have higher potential lifetime earnings. Government-guaranteed funding for higher education will also further inflate costs and reduce quality as things are rationed without market prices.

 About $85 billion toward Pell Grants, and increasing the maximum award by about $1,400 for low-income students

Pell Grants, like many subsidies for higher education, benefit school administrators more than students. As subsidies increase, so does tuition, and so do administrative costs. Students eligible for Pell Grants often take out student loans to cover the remainder of their education expenses and they graduate with heavy debt burdens. To help make higher education more affordable, government should remove  demand subsidies and supply restrictions, forcing schools to compete for students by slimming down their bloated administrative departments and by increasing access to lower tuition.

 A $62 billion grant program to increase college retention and completion rates

There is no evidence that a lack of funding is causing retention problems at colleges and universities. There is, however, substantial evidence that low-quality government-run primary and secondary schools have failed to provide students with the knowledge and skills to succeed at the college level. The solution is not more government spending, but more educational choice throughout the education system.

 A $39 billion program that gives two years of subsidized tuition for students from families earning less than $125,000 enrolled in a four-year historically Black college or university, tribal college or university, or minority-serving institution

Subsidies in higher education is what’s leading to the rapid increases in tuition, so doubling down on that is poor policy rather than finding ways to increase competition and lower prices while improving quality.

 $45 billion toward meeting child nutritional needs, including by expanding access to the summer EBT program, which helps some low-income families with children buy food outside the school year

This is another government program that is fraught with waste and inefficiency. We would do better to lift burdensome regulations and taxes off the backs of small business, stimulating development, investment, and job growth. A parent with a well-paying job can afford to feed his or her own children.

 $200 billion to make permanent the $1.9 trillion COVID-19 stimulus plan’s provision lowering health insurance premiums for those who buy coverage on their own

This sounds like a subsidy for those buying health insurance, but it is actually a subsidy for the insurance companies. After the implementation of the Affordable Care Act, which would supposedly reign in profits of the insurance companies, those profits reached record highs. People want more choices for healthcare, not handouts to insurance companies.

 Extending through 2025, and making permanently fully refundable, the child tax credit expansion that was included in the COVID-19 relief bill

As Ronald Reagan said, nothing is so close to eternity as a temporary government program. The justification for transitory COVID-19 relief was the pandemic, which is now far past its peak as we approach herd immunity. There is no reason to continue these temporary relief measures going forward.

 Making permanent the recent expansion of the child and dependent care tax credit

These tax credits are accomplishing the opposite of the bipartisan welfare reforms of the 1990s. Instead of rewarding work, they reward idleness. These government handouts will serve to trap people in a cycle of poverty and dependency.

 Making permanent the earned income tax credit for childless workers

This is another example of a government program taking on a life of its own. The American Rescue Plan Act (ARPA) tripled the credit and gave benefits to childless workers that were previously reserved to working parents. The justification for this ill-conceived measure was the temporary hardship from government-imposed lockdowns; there is no reason to make them permanent but rather open their economies so people can find jobs and prosper. The effect of these government handouts is to keep people in low-wage jobs because the tax credit is quickly phased out as income rises. Once again, these programs cause dependency on government instead of letting people prosper.

https://thecannononline.com/president-bidens-terrible-horrible-no-good-very-bad-ideas/  

Let’s start with a simple fact: It’s not economic “stimulus” when someone comes along, takes money from your right pocket and puts some of it back in your left pocket (keeping much of it for “other uses”). That’s sleight-of-hand, not stimulus, which is a reason the government can’t stimulate anything other than more government.

That’s more and more true when less and less of the funds go back in your pocket. And make no mistake, President Joe Biden’s plans for a third “stimulus” bill—eclipsing the previous two—isn’t about helping struggling Americans hit hard by the pandemic and the shutdowns. Instead, it’s a massive, pork-laden bill that seeks to keep many of his lavish campaign promises and shore up support among key constituencies.

And nowhere is this more evident than in the area of climate activism.

According to CNBC, “The recovery plan, to be unveiled this week, will likely involve installing thousands of electric vehicle charging stations and building millions of new energy-efficient homes.” (Note to President Biden: Out-of-work Americans can’t afford new electric vehicles.)

Biden’s plan to “Build Back Better” also “supports his broader goal to achieve carbon-free power generation by 2035 and net-zero emissions by 2050”—an impossible goal that, even if it was achievable, would have little effect on global temperatures.

But that’s not all.

The Washington Post reports that it would spend “hundreds of billions of dollars to repair the nation’s roads, bridges, waterways and rails. It also includes funding for retrofitting buildings, safety improvements, schools infrastructure, and low-income and tribal groups, as well as $100 billion for schools and education infrastructure.”

And he plans a slew of massive tax hikes to help pay for it.

He could raise the corporate tax rate from 21% to 28%, which would destroy hundreds of thousands of jobs, and raise taxes on American individuals. These actions and others would undo key parts of the Tax Reform and Jobs Act of 2017 that combined with deregulation helped launch tangible economic prosperity until the global pandemic.

Each of these initiatives—climate activism, massive “infrastructure” spending and tax hikes—is bad economic policy in and of itself. Together, they’re a trifecta of terrible, guaranteed to overburden our economy and saddle us and future generations with more government, more debt and less opportunity.

History demonstrates that despite the promises of a Green New Deal, new green jobs prove elusive—and the ones that are created are very, very expensive, which requires more government spending of our hard-earned tax dollars that reduces growth and jobs in the process.

Here’s what President Obama said in his 2008 acceptance speech at the Democratic National Convention: “I’ll invest $150 billion over the next decade in affordable, renewable sources of energy—wind power, and solar power, and the next generation of biofuels—an investment that will lead to new industries and 5 million new jobs that pay well and can’t be outsourced.”

That never happened.

Obama himself later acknowledged that “Shovel-ready was not as shovel-ready as we expected.” That went for both the climate jobs (his policies sent solar panel manufacturing to China, for example, and other companies simply misled the government, took the money and declared bankruptcy) and for infrastructure jobs.

The good news is that we know what works. We can truly support more self-sufficiency, dignity, and human flourishing by fully opening the economy up.

Americans aren’t clamoring for a Green New Deal (when they’re told what it will cost), but they sure would like to dine out, see family members again and open up their businesses without the heavy-handed pandemic measures imposed by governments at every level.

It begins with Congress rejecting the third “stimulus” boondoggle. States should also reject some if not all of the latest round of bailout money to keep from unnecessarily expanding government programs and losing some independence to the federal government. And Congress should instead adopt the Texas Model of less spending, lower taxes and more reasonable regulation.

A great next step would be for the Biden administration to lift its “halt” on new oil and gas permits on federal lands and in federal waters.

That action alone would achieve all three of Biden’s stated goals for his “stimulus”: It would reduce emissions by allowing access to cleaner-burning natural gas, it would support many new and existing high-paying jobs for Americans (instead of outsourcing them to other countries, which we’ll be forced to buy our petroleum from), and it would support infrastructure improvement through the taxes producers pay for their use of our roads and bridges.

Another step would be to rein in excessive government spending that is bankrupting our country.

Ultimately, we can regain the prosperity we had before the pandemic—but not with Biden’s progressive plan.

https://thecannononline.com/more-stimulus-no-thanks/

In this Let People Prosper episode, we discuss the key elements of real property tax cuts (slower growth rates and lasting tax reductions), movement afoot to eliminate civil asset forfeiture, and potential expansions in local liberty that are being discussed at the Texas Legislature. As we get closer to the end of session, these are critical aspects that you don't want to miss. 

​#letpeopleprosper

In this Let People Prosper episode, we discuss how to expand local liberty, reform the criminal justice system, and help people prosper by focusing on spending restraint at every level of government. Please watch and share this episode! 

​#LETPEOPLEPROSPER