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Jay Powell has no idea what issues he finds himself in. In a “60-minute” interview that aired Sunday night, the mild-mannered Fed chairman dared to suggest that our economy was on the verge of “growing much faster,” and predicted better than expected job creation. future.
It didn’t suit Nancy Pelosi, D-Calif. Asked about Powell’s remarks, the Speaker of the House highlighted his assessment that the nation will only “start to see” improvement and that the biggest risk to the economy remains a further increase in COVID-19 cases . ‘
Who would have thought that GDP growth could be so controversial? Or that optimism about the economy could be such an affront to Democrats?
LIZ PEEK: THE PARTISAN PRESIDENCY OF BIDEN – DEMS TOO LEFT TO REACH THE AWAY. HERE’S WHY
Joe Biden and his fellow Democrats want the country to continue shaking in terror. They know that the only possible way to pile trillions of dollars in freebies to pro-Democrat groups is to convince Americans that the end is near. They have always been the party of alarmism, warning, for example, that the world will end in 12 years if we fail to tackle climate change, but today their pessimism is sharp and determined.
It is also dangerous.
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As Republicans and Democrats argue over what Transportation Secretary Pete Buttigieg says is “semantics” – as if hundreds of billions of dollars set aside for home care in the Bill on ” infrastructure “is really infrastructure – our country is accumulating more debt to our economy than at any time since World War II. We can agree that COVID has dealt a terrible blow to our nation, but as a national disaster it does not have the rank of the last Great War.
Here is one way to assess where we are and what kind of federal spending might make sense. In February 2009, as President Obama signed the $ 800 billion stimulus package, unemployment was 8.1%, down 10%, and the number of unemployed Americans was 12.5 million, growing fast.
For comparison, in March 2021, as Democrats (alone) passed the bailout, unemployment rose to 6%, was falling, and there were 10 million people out of work.
But it is this figure that tells us that the $ 1.9 trillion in new spending was excessive: While Obama put federal money to work in an attempt to offset the downturn caused by the financial crisis, there is no had only 3 million jobs open across the country, and the number was falling. We know this from the Bureau of Labor Statistics JOLT (or job postings) report.
In contrast, last month’s JOLT report showed that on the last day of February of this year, there were 7.4 million jobs available, and that number was increasing. If all of these jobs were filled, unemployment would be close to where it was in February 2020, before COVID destroyed our country.
Does it matter? Is overspending hurting our country? Yes, the risks to our country are that the massive spending by Democrats will trigger damaging inflation and that the expansion of welfare programs contained in the various âreliefâ bills will become a permanent part of our government, slowing the rate of growth. future growth. These risks are real and are totally ignored by Democrats.
If the economy is recovering on its own, as Powell suggested and the data shows, why reject monster spending bills that could turn out to be destabilizing?
In addressing this last statement first, it is important to recognize the disproportionate magnitude of recent spending.
In 2000, federal spending represented 17.4% of our country’s production, measured by GDP. Last year, this figure exceeded 31%; it was before any expenditure of the American rescue plan.
This year, spending could represent an even larger portion of the budget. Keep in mind that these figures do not include public and local spending, which in 2000 brought total government spending to 34% of GDP and last year to 44% of GDP. This puts us not far behind Sweden (48%), often considered a quasi-socialist nation, and well above China with 34%.
The increasing share of our country’s production occupied by government spending is one of the reasons why productivity has declined over time. Public spending is inefficient at best, counterproductive at worst. Think about your local Department of Motor Vehicles versus Amazon. What does the job best?
Productivity growth is what enables wage increases; as workers contribute more and their labor is more valuable, companies can afford to pay more. It is important.
As for inflation, when too much money runs after a limited amount of goods, prices go up.
Former Treasury Secretary Larry Summers has been outspoken about the risks of overspending, saying the past year reminds him of the period that brought about the hyperinflation of the 1970s.
Summers told Bloomberg TV: “But as I watch $ 3 trillion in stimulus, $ 2 trillion in excess savings, major acceleration from COVID in the rearview mirror, Federal Reserve expected rates to zero for three years even in a booming economy, record growth this year, a major expansion of the Fed’s balance sheet and many new fiscal stimulus to come, I’m worried. ”
Summers is in the minority today, but he is right; inflation is a serious risk that others are starting to point out as well. Ed Hyman, longtime Wall Street’s top economist, is among those looking for inflation to accelerate “more than expected.”
Why take a chance? If the economy is recovering on its own, as Powell has suggested and the data shows, why reject monster spending bills that could turn out to be destabilizing?
Because the Democrats cannot bear to let this crisis pass without drawing all its value from it. The more than $ 2 trillion infrastructure bill is an eyesore, stuffed with payments to big Labor and minorities who helped elect Joe Biden.
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There is no voice of moderation in the Democratic Party today. There is a feeling of hopelessness, a urge to spend as if there is no tomorrow.
What is the rush? Perhaps that’s because Democrats know the public will reject their blind vote buying and risky spending in 2022, and take away their majority in the House and Senate. Hope they are right.
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