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Study Warns Biden’s ‘Stimulus’ Plan Will Hurt Economy in the Long Term

(Foundation for Economic Education) President Biden is hitting the road and traveling across the country to pitch his $1.9 trillion COVID-19 stimulus and relief spending proposal to voters.

The legislation includes $1,400 relief checks, a further six-month expansion of “temporary” super-generous unemployment benefits that often pay more than work, $350 billion for bailouts for state and local governments, partisan provisions like a federal $15 minimum wage, and much more. Economists interviewed by FEE warned the package was an “economically unjustified” plan that “incentivizes unemployment.”

Yet with his road trip and ongoing lobbying efforts, Biden hopes to persuade voters and members of Congress that his stimulus proposal is necessary for long-term economic recovery. But a new Ivy League analysis suggests the opposite. 

Scholars at the University of Pennsylvania’s Wharton School of Business analyzed the plan and found that the massive spending splurge—which costs roughly $13,260 per federal taxpayer—would only cause a “slight uptick” in economic growth in 2021. The analysts warned that this minor boost would just be “instant gratification,” and that the skyrocketing government debt caused by the blowout legislation would undermine any gains in the medium-to-long term.

“The existence of the debt saps the rest of the economy,” Wharton analyst Efraim Berkovich said. “When the government is running budget deficits, the money that could have gone to productive investment is redirected.” 

“Effectively, what we’re doing is taking money from [some] people and giving it to other people for consumption purposes,” he continued. “That has value for social safety nets and redistributive benefits, but longer-term, you’re taking away from the capital that we need to grow our economy in the future.”

Biden’s costly plan would explode the national debt. This, per Wharton, would lead to a “crowding out” effect over the coming years as more loan money is taken away from productive business/private sector investments and instead consumed by government debt. 

As a result, the analysts find that workers would see a small decline—not an increase—in their hourly wages by 2022 and a slightly larger decline in their hourly wages by 2040. In 2022, the overall number of hours worked would actually fall due to the plan. 

So, Wharton concludes, Biden’s spending binge would actually lead to a smaller economy in 2022. How’s that for “stimulus?”

[Read more…]

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