Sunday, January 17, 2021

The Next Wave Of Spending Will Not Bring Prosperity

We Are Starting A New Series Of Mistakes
Many of the jobs lost during the covid-19 shutdowns are not coming back. A big part of the problem is this is only one indicator of the carnage taking place in our economy. As small businesses closed their doors forever, a massive change has taken place in the economy. This translates into far higher deficits going forward as many more Americans exit the workforce. Adding to our dilemma is the answer to our problem being touted around includes giving substantial amounts of money to most Americans which reduces their incentive to get out and hustle to find work. This underlines the fact we should not confuse what some call "the latest economic rebound" with a "recovery."

After these numbers were released, Biden came out declaring his administration with its two newly elected Democrat Senators would hit the ground running.

 “The price tag will be high,” Biden said of his planned package in Wilmington, Delaware. He promised to lay out his proposals before taking office on Jan. 20, he also stated, “It will be in the trillions of dollars.” 

The package Biden laid out only came in at 1.9 trillion dollars disappointing some of his followers. This is because it does not include a great deal of what he has promised. Missing were things like spending on infrastructure and forgiving student loans. This, however, is only the first of many packages that will be rolling through congress in an effort to halt the economy from unraveling. To see how devastating the pandemic and the lock-downs instituted to slow its advance have been on the economy we only need to look to cities such as New York where it has become obvious the effects will be long term. Recent revelations that many large and notable companies now intend to relocate to smaller cities in coming years will only exacerbate these problems.

While the nation's average unemployment rate is around 6.7%  Bloomberg reports the Bronx's unemployment rate stands around 16%. Not only could the virus-induced downturn result in roughly a third of the city's businesses going under. Cities, where tourism is a large part of the economy, have been particularly hard hit. Hotels, restaurants, and all the businesses that serve them and their customers are suffering. The failure of these small and medium-sized firms are causing people to flee such areas en masse. Which in turn causes vacancies to soar and rents to fall. Simply throwing money at a problem does not guarantee it will halt the formation of a self-feeding loop.

To be perfectly clear, the problem we face is that poorly spending even trillions of dollars does not necessarily create a strong economy. As usual, when it comes to government spending more often than not much of the money is simply squandered. An example of this is how many people see government spending on infrastructure as a job creator and a silver bullet for our ailing economy I would like to raise a word of caution, things are not that simple. What is clear is that when Washington begins to talk about infrastructure spending hands go out across America as politicians and businesses  rush to endorse such programs. Of course, they claim this should be administered on a local level so the money is not squandered by the inefficient minions of  Washington that do not understand the priorities we face.

This sets in play the feel-good issuance of what is herald as free money being gifted by those in charge. The truth is more "bridges to nowhere" and wasted spending exists than the taxpayer could ever imagine. Often infrastructure spending falls short of creating real wealth for our country but merely feeds cronyism and ends up lining the pockets of those in power and their friends. History shows much of infrastructure spending is poorly spent. In the long run, a country's economic policies and its system of taxation are far more important to the economy than government spending.

The fact governments across the world are embarking on similar spending programs should do little to reassure Americans considering the explosion of debt we have witnessed since 2008. A slew of problems come with economic decline and the working poor take much of the pain, this becomes evident in the form of more social unrest and increasing violent crime. As rents and mortgages go unpaid do not be surprised to see inequality continues to grow. We should remember this is all an experiment destined to result in a false economy so rooted in unsustainable stimulus that it cannot endure.

 

Footnote: Rather than seeing this as doom porn, please consider this as a strong objection to the path we are on and have been on for some time.

 ( Republishing of this article is welcomed with reference to Bruce Wilds/AdvancingTime Blog )

4 comments:

  1. And what did they expect by shutting down the economy in the US? Albert Einstein's definition of insanity is doing the same thing over and over and expecting different results.

    I find the national and New York unemployment numbers questionable at best when we are basically in a depression. According to John Williams from Shadowstats.com the national unemployment numbers are around 24-28% and inflation is around 10-14%.

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  2. Wait until they raise income taxes(purportedly only on those earning >$400K), eliminate the lower tax rates on capital gains, and raise the national minimum wage to $15/hour. This will kill off even more jobs, and then we'll get more unemployment income, tax subsidies, and medicaid for the newly unemployed and poor. Lastly will come universal basic income and it's off to the races. To top it all off, there are app. 4,000 baby boomers per day entering retirement and claiming their Social Security and Medicare benefits. Where is all this money going to come from? Oh, wait, I know, we'll just "borrow" it from the central bank.

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  3. 320-30 million folks in the US. Probably 300 million making less than 100k. Why not simply send all 300 million a check for 100k ? Price tag: 30 trillion...doubles the debt, but what the heck, we're gonna double it anyway in 4-5 years.....not like the current debt is ever gonna be paid back anyway.
    Think of the positive side.....we'd end poverty for that year, and the economy would ROAR with 100k burning holes in 300 million pockets !
    Of course nobody but nobody would want to work that year.....and most of Central America would be on the move north (and likely a lot of Canadian moving south..a new experience !)

    Yeah, I think it's time for some really radical thinking, and politicians always go so part way in stuff, huh ?

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  4. It gets much worse, if you can believe that statement. According to Peter congress will bail out all the blue states with large deficits.
    https://bayourenaissanceman.blogspot.com/2021/03/as-predicted-biden-administration-will.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+BayouRenaissanceMan+(Bayou+Renaissance+Man)

    Not good, we will be paying for large pension plans and everything else states want to spend.
    Joe

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