This
week, my Democrat colleagues are poised to push through the Senate an
untargeted and unfocused $1.9 trillion tax and spending package under the guise
of COVID relief.
This
is unfortunate because it didn’t have to be this way. In the past year,
Republicans and Democrats were able to work together to pass more than $4 trillion
in COVID relief with strong bipartisan support.
From
the start of this year, my Republican colleagues and I have stood ready to
engage in good faith bipartisan negotiations to provide further targeted relief.
However, despite talk of unity and bipartisanship by President Biden, the new
Senate Majority hasn’t even attempted to reach across the aisle.
The
majority, demonstrating their unwillingness to compromise, have resorted to
using special budget procedures so that they may pass a partisan proposal
strictly along party lines. The result is an unwieldly nearly $2 Trillion package
that isn’t shaped according to current economic realities, but by a partisan
liberal agenda.
In
February, the non-partisan Congressional Budget Office (CBO) projected that
even without any further stimulus, gross domestic product (GDP) will return to
its pre-pandemic levels by mid-2021. And, for the year, the economy will grow
at 4.6 percent.
Moreover,
it was recently reported that retail sales jumped 5.6 percent in January. And,
the National Retail Federation is projecting retail sales for the year to grow
at the fastest rate in two decades. At the same time, personal income is
reported to have risen by 10 percent and the personal savings rate has surged
from a historically high 13.4 percent to over 20 percent.
It’s
no longer March of 2020 when the economy was in free fall and businesses and
places of employment were shut down by government edict. While many individuals
and certain sectors of our economy continue to struggle and deserve a helping
hand, others have largely recovered and are no longer in need of assistance.
A
COVID relief package should reflect this reality in both size and scope.
Even
long-time Democrat economists, such as Obama’s former Director of the National
Economic Council, have raised concerns about enacting nearly a $2 trillion
stimulus package at this point in the recovery. As Mr. Summers noted, “the
proposed Biden stimulus is three times as large as” the gap between actual and
potential output as estimated by CBO.
Enacting
a stimulus unmoored from economic reality poses real risks to our economy,
including inflation and slower economic growth moving forward. In fact, a Penn-Wharton
Budget Model analysis of the President’s proposal projects the proposed
stimulus would result in a decrease in both GDP and wages in 2022 and over the
next two decades.
While
inflation has been subdued in recent years, we shouldn’t let that lull us into
a false sense of confidence that we can spend with impunity with no
consequences. We are in unchartered
waters with debt held by the public exceeding the size of our economy and
trillion dollar annual deficits.
Moreover,
as economist John Greenwood and Steve H. Hanke, professor of economics at John
Hopkins, recently warned, the “money supply will grow by nearly 12% this year.
That’s twice as fast as its average growth rate from 2000-19. It’s a rate that
spells trouble – inflation trouble.” And
that is without another round of stimulus.
Concerns
of inflation have been dismissed by the White House and the Federal Reserve. This
sounds familiar to those of us who witnessed the stagflation of the 1970’s. We
were told by President Nixon and his advisors that they could spend their way
to lower unemployment and economic growth, without inflation. They were wrong. The
Nixon administration’s mistakes ushered in a decade of disastrous inflation.
It
was with this background that I first ran for Congress on a platform of
fighting inflation. Inflation is a regressive, stealth tax on every single
American. It is particularly unfair to those who have very little money to
begin with, and those who have lived beneath their means to save for the future
only to see the hard work wiped out as the value of the dollars they put away
plunges.
Not
only is the size of the package detached from reality, so is its scope. A
common adage for stimulus and economic relief measures is that they should be
timely, temporary and targeted. By this standard, the Democrat’s stimulus is
well wide of the mark.
More
than one third, or $700 billion, of the funding in the bill wouldn’t be spent
until 2022 or beyond according to CBO. Hundreds of billions still wouldn’t even
be spent by 2023. I don’t know about you, but I don’t see how spending hundreds
of billions of dollars years from now is either timely or targeted. What does
it have to do with fighting the pandemic in 2021?
Nearly
a quarter of the package, or $422 billion, is dedicated to direct payments to
households with incomes up to $200,000 regardless of whether they have lost a
job or experienced any loss of income.
Such
untargeted payments make little sense when just this past week it was reported
that personal income was up 10 percent and the personal savings rate soared to
over 20 percent. We clearly shouldn’t be using taxpayer dollars to pad the bank
accounts of those with six figure incomes.
Another
$350 billion of the package is allocated to bail out fiscally irresponsible
states at the expense of states that have managed their budgets wisely, like my
home state of Iowa.
This
spending is hard to justify given recent reports indicating most states saw
little to no drop in revenue between in 2019 and 2020. And, many states that
were previously projecting shortfalls are now projecting budget surpluses.
The
package also includes hundreds of billions of dollars in liberal wish list
priorities that have little to do with the current pandemic. This includes
enhancements to refundable tax credits, an expansion of Obamacare subsidies,
and an $86 billion taxpayer bailout of poorly managed multiemployer pension plans.
This
entire COVID package suffers from my Democrat colleague’s flawed belief that
just throwing money at a problem is always the solution. But, money alone often
fails to address the underlying problem.
In
the case of COVID, there are some things that no amount of money can address. Until
widespread immunity is achieved, many people will not feel comfortable eating
out, going to a movie, taking in a concert, or traveling on vacation. Spending
trillions of dollars will not change this.
So
yes, let’s prioritize funding for vaccine distribution, assistance for the
unemployed, and aid for small businesses in struggling sectors. And by all
means, let’s open the schools! Doing this doesn’t require $2 trillion.
Let’s
remove the pork. Let’s set aside the long term left-wing wish list and work
together as we did before.
Several
of my Republican colleagues approached the White House weeks ago with a long
list of items proposed by President Biden that could get Republican support
with minimal tweaks. A bipartisan package along those lines could well have
passed by now. It’s not too late.
