U.S. Fiscal Policy Becoming a Monstrous, Economy-Killing Folly
Feb. 8 , 2021 (EIRNS)—Behind the Joe Biden avatar, is Andrew Yang actually the President? How much newly-printed money can the government give away without any investment whatsoever in productive employment or productivity, without inflating and soon exploding the Wall Street debt bubble?
After $3.5 trillion in COVID relief legislation in 10 months—without creating a single productive job, let alone a single new economic infrastructure project; after seeing trillions in deposits flood into Wall Street banks while they withdraw credit from the real economy; after the Fed has ballooned the reserves of those Wall Street giants by some $2.5 trillion in the same period; after seeing those individuals and households who didn’t need the checks throw them into stock market manias since saving the money would produce zero gain; the fact that another $1.9 trillion is on the way is not even the story now.
It is now becoming a bipartisan consensus that these grants should be annual to all but the richest Americans (who get far greater gains through the stock and bond markets). The Biden $1.9 trillion relief bill includes about $200 billion, intended to be repeated annually, in new payments to all children. Sen. Mitt Romney of Utah is putting forward legislation to give annual grants to all families earning up to $400,000/year; the amounts will probably shift as he negotiates, but it would involve roughly $1 trillion every year. There is also a big expansion of child credits planned in Biden’s $1.9 trillion bill. Romney will have plenty to negotiate with; Democratic think-tanks like CAP and the Niskanen Center, and the Washington Post, have immediately and enthusiastically supported him. The Post on Feb. 6 reported Biden “open to the idea.”
And the American zero-interest lady, former Fed chair and now Treasury Secretary Janet Yellen, went on two Sunday TV shows to say, on CBS “Face the Nation,” “I’m afraid the job market is stalling”; and on CNN “State of the Union,” that Biden’s $1.9 trillion relief package would produce “full employment next year.” Yellen may be putting Christina Romer in the shade—as Obama’s chief economist, Dr. Romer claimed his “stimulus act” would drop unemployment to 8% by the end of 2009, but it remained at 10% at the end of 2010.
As with Obama’s “stimulus,” the only economic investment in the Democratic bill is $100 billion in the Clean Energy and Sustainability Accelerator Act—accelerator is the chosen name for a local “green bank”—to push public and private funds into throwback energy technologies which will reduce the productivity of the economy.
The job market has, in fact, stalled, at the bottom of a deep hole. The Labor Department’s January jobs and unemployment claims reports released Feb. 4 and 5 showed negative job growth over the past three months combined. They counted just under 20 million on unemployment benefits and 7 million more “out of the workforce but wanting a job,” or 16% unemployment. There was negative growth in all categories of goods-producing employment in January, and growth of any kind largely in temporary employment by levels of government.
Since this entire, implicitly hyperinflationary process, of spiking government and private corporate debt, is now causing U.S. Treasury long-term rates to rise, Jerome Powell’s Fed will shortly be buying more long-term Treasuries from the big banks, to drive those rates back down. Bank reserves will rise still higher while stock and derivatives markets are driven toward explosion for lack of anywhere else to invest money. The destruction of the underlying physical economy will continue without a complete reversal of policy towards it.