By Lawrence Kudlow, NY SUN
With all respect to President Biden — my criticisms are never personal but always based on policy — his statement yesterday on the proposals in his $4 trillion spending plan is malarky.
“If we increase the availability of quality, affordable child care, elder care, paid leave, more people enter the workforce,” he said. “These steps will enhance our productivity, raising wages without raising prices. That won’t increase inflation. It will take the pressure off of inflation.”
This is the most perverse economic recitation I can ever recall. His advisers have sold him a bill of goods — that so-called government investment, which is really a progressive euphemism for government spending. His idea is that, indeed, massive social spending without work requirements or employment incentives is somehow going to boost the economy.
Already we’ve seen overly generous jobless benefits, a mélange of welfare payments from the most recent covid relief bill last winter, provide a deterrent or a discouragement to work. Hundreds of thousands, millions stayed home longer than they needed to, or longer than they even wanted to because it paid more to stay home. That’s not productivity. That’s not growth.
Plus, if big spending leads to big deficits, it may well cause big money creation from the Federal Reserve, which until recently was buying 55% of the new treasury bonds. Inflation is a monetary phenomenon. This kind of financing does risk permanently higher inflation.
We’re not there yet, and the legislation hasn’t passed yet, but that’s the risk of the entitlement model. Less work, more inflation. But there’s more. President Biden simply does not understand the incentive model of growth.
Governments don’t create inventive new business equipment and technology advancements. Governments don’t create new business start-ups. Governments don’t create new jobs and higher wages. Private enterprise does. The Biden model is so heavily taxing and regulating private enterprise that it will not pay after tax to work, invest, or take risks.
You know, safety nets are one thing, but it’s free enterprise that drives the American economic machine. Free enterprise capitalism is the real safety net. Taxing corporations two and three times, doubling the capital gains tax, minimum taxes that disallow equipment expensing or shortened depreciation, even letting foreign countries tax American countries at will.
What a contrast to the Trump model of lower taxes, minimal regulation, and energy independence. It produced fantastic results of record low unemployment, virtually no inflation, cheap and well supplied energy — booming stocks, lower poverty, great minority advancement. That incentive model of growth, which rewarded success, worked. It worked well.
The 45th president doesn’t believe in free enterprise. For that is not in the progressive left woke handbook. He intends to use a zealot’s approach to antitrust policy that will literally regulate all business sectors. His intent to implement the Green New deal will likewise give the federal government license to regulate every nook and cranny in the economy.
The supply side incentive model of growth has worked again and again, down through the years. It will work again if President Biden and his team would just let it. But they won’t. If this model is legislated we will in fact have high inflation, and low growth.
The Fed could print too much money. And the tax and regulatory attacks on business will produce too few goods. I’m not saying this will inevitably happen. There’s still a whole lot of legislative and political activity between the lip and the cup.
Most troubling, though is that Mr. Biden shows no understanding of the kinds of criticisms that I and others are making. His top people are selling him a left-wing bill of goods and like all left-wing central planning and social engineering, it is doomed to fail.
Tongue in cheek, Andy Kessler and I have been saying “Go woke, go broke.” You know what? I would truly hate to see that come true.
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