{"id":26359,"date":"2021-03-16T11:10:09","date_gmt":"2021-03-16T15:10:09","guid":{"rendered":"https:\/\/www.megalextoria.com\/wordpress\/?p=26359"},"modified":"2021-03-16T11:10:47","modified_gmt":"2021-03-16T15:10:47","slug":"wharton-study-warns-bidens-expensive-stimulus-plan-will-hurt-economy-in-the-long-term","status":"publish","type":"post","link":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/2021\/03\/16\/wharton-study-warns-bidens-expensive-stimulus-plan-will-hurt-economy-in-the-long-term\/","title":{"rendered":"Wharton Study Warns Biden\u2019s Expensive \u2018Stimulus\u2019 Plan Will Hurt Economy in the Long Term"},"content":{"rendered":"

\"\"<\/a><\/p>\n

President Biden is hitting the road and traveling across the country to pitch his <\/span>$1.9 trillion COVID-19 stimulus<\/span><\/a> and relief spending proposal to voters. <\/span><\/p>\n

The legislation <\/span>includes<\/span><\/a> $1,400 relief checks, a further six-month expansion of \u201ctemporary\u201d super-generous unemployment benefits that often pay more than work, $350 billion for bailouts for state and local governments, partisan provisions like a federal $15 minimum wage, and much more. Economists interviewed by FEE <\/span>warned<\/span><\/a> the package was an \u201ceconomically unjustified\u201d plan that \u201cincentivizes unemployment.\u201d<\/span><\/p>\n

Yet with his road trip and ongoing lobbying efforts, Biden hopes to persuade voters and members of Congress that his stimulus proposal is necessary for long-term economic recovery. But a new Ivy League <\/span>analysis<\/span><\/a> suggests the opposite. <\/span><\/p>\n

Scholars at the University of Pennsylvania\u2019s Wharton School of Business analyzed the plan and found that the massive spending splurge\u2014which costs roughly <\/span>$13,260<\/span><\/a> per federal taxpayer\u2014would only cause a \u201cslight uptick\u201d in economic growth in 2021. The analysts warned that this minor boost would just be \u201cinstant gratification,\u201d and that the skyrocketing government debt caused by the blowout legislation would undermine any gains in the medium-to-long term.<\/span><\/p>\n

\u201cThe existence of the debt saps the rest of the economy,\u201d Wharton analyst<\/span> Efraim Berkovich<\/span><\/a> said. \u201cWhen the government is running budget deficits, the money that could have gone to productive investment is redirected.\u201d <\/span><\/p>\n

\u201cEffectively, what we\u2019re doing is taking money from [some] people and giving it to other people for consumption purposes,\u201d he continued. \u201cThat has value for social safety nets and redistributive benefits, but longer-term, you\u2019re taking away from the capital that we need to grow our economy in the future.\u201d<\/span><\/p>\n

Biden\u2019s costly plan would explode the national debt. This, per Wharton, would lead to a \u201ccrowding out\u201d effect over the coming years as more loan money is taken away from productive business\/private sector investments and instead consumed by government debt. <\/span><\/p>\n

As a result, the analysts find that workers would see a small decline\u2014not an increase\u2014in their hourly wages by 2022 and a slightly larger decline in their hourly wages by 2040. In 2022, the overall number of hours worked would actually <\/span>fall<\/span> due to the plan. <\/span><\/p>\n

\n
\n<\/div>\n
\n<\/div>\n<\/div>\n

So, Wharton concludes, Biden\u2019s spending binge would actually lead to a <\/span>smaller<\/span> economy in 2022. How\u2019s that for \u201cstimulus?\u201d<\/span><\/p>\n

And we must also consider the other elements of Biden\u2019s plan that would sabotage the economic recovery, like the <\/span>inclusion of a federal $15 minimum wage.<\/span><\/a> This partisan provision would <\/span>eliminate millions of jobs<\/span><\/a>, <\/span>devastate struggling small businesses<\/span><\/a>, and <\/span>lead to higher consumer prices.<\/span><\/a><\/p>\n

You might be wondering: Why would anyone support a stimulus effort that offers only small short-term gain in exchange for long-term economic detriment? It\u2019s due to a common flaw in policy thinking that focuses on the seen benefits while ignoring the unseen costs.<\/span><\/p>\n

Famed economist <\/span>Fr\u00e9d\u00e9ric<\/span> Bastiat discussed this fatal flaw of policymaking in his essay <\/span>“<\/span>What Is Seen and What Is Not Seen in Political Economy<\/span><\/a>.\u201d<\/span><\/p>\n

\u201c[A] <\/span>law gives birth not only to an effect but to a series of effects,\u201d Bastiat wrote. Only the first effect is foreseen by naive policymakers who fall victim to this fallacy, while the many second-order consequences remain unseen.<\/span><\/p>\n

\u201cIt almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse,\u201d he wrote. \u201cHence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come\u2014at the risk of a small present evil.\u201d<\/span><\/p>\n

It\u2019s fair to say that in this case, the president is thinking like a bad economist. (Or a good politician). <\/span><\/p>\n

Biden knows that the short-term benefits of his proposal\u2014like $1,400 checks in many peoples\u2019 mailboxes\u2014will be seen and felt by millions of voters who will directly credit him for it. (His name will <\/span>even be on the checks<\/span><\/a>). Yet the vast and diffuse costs imposed on people by the plan over time will most likely never be directly traced back to the legislation itself, instead observed only by economists and analysts who parse broad economic data and trends. <\/span><\/p>\n

So, Biden\u2019s proposed stimulus can simultaneously be an economic net-negative and a political winner. And, unfortunately, many of our politicians won\u2019t mind the tradeoff\u2014because the only loser in this political bargain is the average American citizen.<\/span><\/p>\n

\n<\/div>\n
\n

\nBrad Polumbo
\n<\/a><\/h5>\n

Brad Polumbo (@Brad_Polumbo<\/a>) is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic Education.<\/p>\n<\/div>\n

This article was originally published on FEE.org. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

President Biden is hitting the road and traveling across the country to pitch his $1.9 trillion COVID-19 stimulus and relief spending proposal to voters. The legislation includes $1,400 relief checks, a further six-month expansion of \u201ctemporary\u201d super-generous unemployment benefits that often pay more than work, $350 billion for bailouts for state and local governments, partisan provisions like a federal $15 minimum wage, and much more. Economists interviewed by FEE warned the package was an \u201ceconomically unjustified\u201d plan that \u201cincentivizes unemployment.\u201d Yet with his road trip and ongoing lobbying efforts, Biden hopes to persuade voters and members of Congress that his stimulus proposal is necessary for long-term economic recovery. But a new Ivy League analysis suggests the opposite.  Scholars at the University of Pennsylvania\u2019s Wharton School of Business analyzed the plan and found that the massive spending splurge\u2014which costs roughly $13,260 per federal taxpayer\u2014would only cause a \u201cslight uptick\u201d in economic growth in 2021. The analysts warned that this minor boost would just be \u201cinstant gratification,\u201d and that the skyrocketing government debt caused by the blowout legislation would undermine any gains in the medium-to-long term. \u201cThe existence of the debt saps the rest of the economy,\u201d Wharton analyst Efraim Berkovich said. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[295,622,1636],"class_list":["post-26359","post","type-post","status-publish","format-standard","hentry","category-news-and-politics","tag-biden","tag-economics","tag-stimulus"],"_links":{"self":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/26359","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/comments?post=26359"}],"version-history":[{"count":0,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/26359\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/media?parent=26359"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/categories?post=26359"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/tags?post=26359"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}