“A billion here and a billion there and pretty soon we are talking about real money.” Late US Republican Senator Everett McKinley Dirksen
It is commonly said that Inflation occurs when too much money chases too few goods and services in an economy. The idea is that when money grows faster than the supply of goods and services, prices will rise at a faster rate.
As most people are aware, the US inflation rate is at a forty year high. There are many villains to blame for this fiasco. We’ve already written about the part played by President Biden’s ruinous energy policies. In addition, the Covid shutdown of the economy certainly did its part in reducing the supply of goods produced and the supply of labor available to provide services. The Federal Reserve should certainly take a bow for the way its easy monetary policies spurred spending and created asset inflation. However, we are going to concentrate here on the sharp increase in Federal spending, and both political parties deserve the blame.
As a reference point, think back to the housing and financial crash of 2008, the worst recession in U.S. history since the Great Depression. In response, in February 2009 Congress passed and President Obama signed the American Recovery and Reinvestment Act. Back then, the Congressional Budget Office estimated its cost to be roughly $831 billion over the 2009-2019 period.
Mere peanuts! In reaction to the Covid pandemic, Congress and two Presidents, in a very short period of time, spent our money like that proverbial drunken sailor.
$8.3 Billion - The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (March 6, 2020) provided emergency supplemental appropriations of $8.3 billion in fiscal year 2020 to combat the spread of coronavirus disease
$225 Billion - The Families First Coronavirus Response Act (March 14 2020) provided funding for free coronavirus testing, 14-day paid leave for American workers affected by the pandemic, and increased funding for food stamps.
$2.2 Trillion - The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act (March 27, 2020) provided funding for one-time cash payments to individuals, increased unemployment benefits, forgivable loans to small businesses, and loans to corporations and state and local governments. Unprecedented in size and scope, this was the largest economic stimulus package in U.S. history. It shockingly amounted to 45% of all federal government expenditures in 2019 ($4.45 trillion).
$920 Billion - Consolidated Appropriations Act (December 28, 2020). Attached to a larger government funding bill, it included $600 stimulus checks; provided billions for vaccines; and renewed a federal boost to unemployment benefits and renewed the Paycheck Protection Program.
$1.9 Trillion – The American Rescue Plan (March 11, 2021). Not to be outdone by former President Trump, the first relief package from President Biden provided for $1,400 stimulus checks, money for schools to reopen, and billions for vaccine distribution and development.
$3.5 Trillion – President Biden’s proposed Build Back Better plan did not pass, due solely to the objection of one Democratic Senator, Joe Manchin. This amount was scaled back to $1.7 Trillion in the proposed Build Back Better Act, but this bill also failed to pass.
$1.2 Trillion – Infrastructure investment and Jobs Acts (November 15, 2021). The cost of Biden’s original proposal – the American Jobs Plan – was for $2.3 Trillion. That number was significantly reduced and passed with bipartisan support.
$740 Billion – The mis-named Inflation Reduction Act (August 16, 2022). The money will go to climate change subsidies, the IRS and extension of Obama Care subsidies
$420 Billion – This is the cost estimate from the Congressional Budget Office in regard to President Biden’s executive action to cancel student loan debt (August 2022). The CBO cautioned that this estimate was "highly uncertain, and some experts think the true cost will be closer to $1 Trillion.
Wow! Adding it all up, in just two and a half years, the US committed to spend over 7.3 trillion in extra spending (over the military and entitlements and other categories). President Biden does not seem very concerned. If it were not for the opposition of Senator Joe Manchin, he would have spent at least another $1.6 Trillion with his spending plans.
Instead, he should have listened to his former economic advisor, Larry Summer. In February, 2021, Summers penned an op-ed for the Washington Post where he laid out his worries about Biden’s massive spending, and said the trillions of dollars Biden wanted to spend could create “inflationary pressures of a kind we have not seen in a generation.”
Professor Summers should lend President Biden his crystal ball. By now it should be obvious to the President that we are not going to spend our way to prosperity.
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