On March 11, 2021, President Biden signed into Legislation the American Immigration Plan Act (ARPA).
This action will pay $1.9 trillion in money the federal government does not have. Officially, this spending is meant to stimulate the US economy and help those most affected by the financial results of the COVID-19 pandemic, both the lockdowns, and the financial recession.
Unfortunately, reality doesn’t match the twist. Truly, ARPA contains very little stimulus for an economy that’s quite wholesome, few resources to support the struggle against COVID, also small real help for those hardest hit. The bill does, however, include macroeconomic hazards, microeconomic distortions, and a Trojan Horse that will enable the most revolutionary –and unconstitutional–components of social technology utopians to establish beachheads from the economy for further and future mischief.
Regrettably, ARPA is not anything exceptional. Only a year before, I wrote about comparable folly from the CARES Act. ARPA continues increase in government spending, and it can be neither wise nor inherent.
The Rescue Plan Act and its Predecessors
ARPA spends $1.9 trillion. We can roughly categorize it as follows:
Public Health (9 percent )
Support to People (39 percent )
Support to Small Business (3%) ($55 billion)
Macroeconomic Support (23 percent )
Agriculture ($10 billion)
Cybersecurity ($2 billion)
Miscellaneous (13%) ($260 billion)
ARPA is the next action to cover the pandemic, economic recovery, and crisis welfare. Back in December 2020, Congress tacked a $833 billion supplement to the 2021 budget (that the Coronavirus Response and Relief Supplemental Appropriations Act, CRRSAA), signed into law by President Trump.
In sum, between March 2020 and March 2021, the federal government spent nearly $5 trillion in extra funds (past the already bloated federal budget).
Where’s the Public Health Funding and Stimulus?
The very first question one might ask, in the midst of a pandemic, relates to ARPA spending –of everything –public health! Just 9 percent of ARPA is devoted to public health (half of that goes into vaccines, and half to testing, veterans health, public healthcare, etc.). CRRSSA devoted 8% of its total to public health; for CARES, it was 21%. It is odd to notice that little of this $5 trillion in COVID-related spending is in fact earmarked for public health; after all, if the pandemic goes away, so do the financial issues. And let’s remember that only around 20 percent of Americans are completely vaccinated.
Beyond this strange situation, we can also reasonably wonder about the stimulus. Simply stated, the US economy is not in a recession, and hence not in need of stimulus. To be certain, unemployment climbed to 14.8% in April 2020, and was above 10 percent in July 2020. But by February 2021, a month earlier ARPA had been signed into law, unemployment had fallen to 6.2 percent. Mortgage defaults (that were 6% before the pandemic) had climbed into 6.75%; rent defaults (that were 15% before the pandemic) had fallen to 19% by March, until ARPA. Again, there’s absolutely no financial crisis. One is left wondering why the national government only spent another 10 percent of GDP to”stimulate” an economy that is not in recession.
Thanks to technological progress that has enabled large-scale telecommuting, there’s absolutely no financial meltdown and no widespread hardship. Obviously, a small fraction of Americans are suffering tremendously, having lost their jobs or health insurance. But ARPA, such as its predecessors CRRSSA and also the CARES Act, is not targeted at assisting those in greatest need. Rather, ARPA grants stimulus checks to about 85 percent of American households, irrespective of need. As there isn’t any financial recession, it’s not (economically) logical to take part in a blanket distribution of funds. But a law that grants goodies to nearly all Americans, without severe means-testing, begins to smell a whole great deal like good ol’ fashioned pre-election politics.
America’s bipartisan profligacy is going to be paid over several generations. Meanwhile, we can expect diminished expansion, higher taxation, and a drop in funding investment.ARPA, such as its predecessors, is not an economic stimulus bill, nor can it be carefully targeted at providing relief to people who really need it. It is significantly better classified with Roman patronage, as a pre-emptive order of votes before the midterm election. Regrettably, President Biden is merely following in the footsteps of his predecessor, also since President Trump did exactly the same at March 2020.
Ok, this really is business as usual in politics. So what? Unfortunately, ARPA, together with its predecessors, introduces two key difficulties: economic implications and inherent issues.
It is apparent that ARPA is neither Keynesian stimulus nor emergency welfare for the hardest hit. We now examine the likely financial consequences of this mammoth spending bill.
The macroeconomic consequences would be the most obvious. The butcher’s bill for both (supposedly ) pandemic-related spending efforts signifies a grand total of 26 percent of GDP over one year. By comparison, the sum of the Bush (II) stimulus, the Obama stimulus, along with the Troubled Asset Relief Program (“TARP”) cost”only” 10 percent of GDP–over four years. What is worse, ARPA spends money the federal government does not have. Until the 1970s, the US debt-to-GDP ratio stood around 30 percent. It then climbed, over the subsequent 40 years, to 82% following the 2007 Great Financial Crisis, then crossed the 100% threshold. It was not until the Trump presidency, at 2020, that the ratio climbed to 129%. Due to President Biden’s latest attempt, the ratio has since passed the 133 percent mark. America’s bipartisan profligacy is going to be paid over several generations. Meanwhile, we can expect diminished expansion, higher taxation, a drop in capital expenditure, and–thanks to its deficiency of means-testing–a possible continuation of this asset bubble, since the richer one of the 85 percent of households receiving national goodies invest, rather than invest, their”stimulus” money.
ARPA will also bring microeconomic consequences. ARPA supports municipal and state budgets–such as those of financially irresponsible entities and people that have a budget surplus–without asking a lot of questions. ARPA bails out undercapitalized pension funds (many linked, what a coincidence, to marriages ) that were already insolvent before the pandemic. The abrupt lockdowns at March 2020 demonstrated just how few Americans have a money book beyond the next paycheck; rather than encouraging financial obligation and savings, CARES and ARPA merely encourage the moral danger of reliance on the taxpayer (and Treasury bondholder). And, as stated by the Roman logic of the patronus-cliens relationships, lots of Americans will get more throughout the term than they did earlier; two-thirds of beneficiaries of national extensions and supplements to unemployment obligations will make more by not working than they would have by working. These microeconomic distortions don’t put the foundations for long term financial growth and social mobility.
ARPA and its intricacies certainly violate the national mandate of enumerated and assigned powers (see Article I section 8, along with the 10th amendment, that don’t countenance this kind of aggressive coverage ).
Before World War I, the national government consumed or controlled less than 3 percent of GDP. Between the two world wars, even at the height of the New Deal, the national burden never passed 10 percent of GDP. After World War II, national spending rose, over 30 years, to 20 percent of GDP, a level that remained steady until 2019. Since the trio of enormous COVID-related spending accounts, the national government controls approximately one-third of the economy. To that, we can add 10 percent of GDP for the cost of complying with national regulations, and nearly 20 percent of GDP in municipal, county, and state spending. In sum, nearly 60% of the US economy is currently controlled by politics, rather than the free discussion of producers and consumers in a competitive industry.
Over the past year, we have noticed a bipartisan attack on constitutional and financial floodgates. But the fact is even worse than appearances. Truly, ARPA is a Trojan Horse that is smuggling in tools that’ll be used for additional power grabs–ones that would not be tolerated save for the pretext of fighting with pandemic and a recession. The educational union machine has not yet spent the manna obtained under the CARES Act, but ARPA is draining it with a further $130 billion–to be spent over seven years. This has nothing to do with stimulus, but is a slush fund. ARPA is smuggling in support for health insurance premiums, including for several recipients who are not unemployed and do possess enough funds. Since conventional legislation can not be procured, ARPA is slowly laying the foundations for single-payer healthcare. ARPA is quietly earning a shift towards Universal Basic Income by offering a monthly child credit for most parents. In sum, President Biden and the Democratic majority are using the pretext of a predator to add a fifth column into the commanding heights of the American economy, setting up an economic takeover that the lack of a senatorial super-majority would not otherwise allow.
A Trillion Here, a Trillion There
Soon we’re talking real money. Regrettably, ARPA’s $2 trillion invoice (on the heels of nearly $3 trillion in 2020 spending) is not the conclusion of the story. On March 31, President Biden outlined a $2.3 trillion American Jobs Plan, indicating additional massive spending on jobs and infrastructure, coupled with a large increase in the corporate tax rate. Income tax rates are certain to follow.
The poet Horace reminds usNaturam expellas furca, tamen usque recurret/et mala perrumpet furtim fastidia victrix. “Drive Nature out with a pitchfork, she’ll always return Victorious over your dumb sure scorn.”
Individuals, companies, unions, and governments will take pleasure in the checks whenever they continue to roll up in. But we are fast heading towards an economy we don’t comprehend and consequences that we can not contain.