Every day, it seems, I wake up to a new article about the Biden recovery bill which makes the following points:
- The bill is a form of disaster relief, not a stimulus. As such, it is necessary to spend as much as necessary to address the disaster. The price tag is irrelevant.
- Sure, the $1,400 checks aren’t well targeted. So what? They’re only a quarter of the bill.
- These ain’t the seventies. Stagflation is a distant memory. Conditions have changed. Learn to love deficit spending; as long as interest rates remain as low as they are today, there’s no real down side to deficits,
The bottom line is that there is no dispute anywhere on the left about #1, which means that most of the ink spilled over this issue is pointless. The problem is limited to #2. The checks can’t be justified as disaster relief, because millions of them will go to people who aren’t suffering, and they aren’t helping to win votes from GOP senators, so what purpose do they serve? They are either a form of stimulus, even though the bill isn’t being sold as a stimulus package, or they are just an outright bribe to the electorate. And even if they are just a quarter of the package, that constitutes a huge sum of money that could be spent on something far more useful.
This wouldn’t matter if we could be absolutely certain that the unnecessary stimulus won’t result in higher interest rates. It is possible that it won’t under today’s conditions. But the laws of supply and demand haven’t been repealed, so we don’t know that for sure; what we do know is that higher interest rates will cause the markets to fall and will boost the GOP. Does the benefit justify the risk?