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Economic Illiteracy on Parade
The new Democratic talking point about their $3.5 trillion budget “reconciliation” is that it “costs zero dollars.” You read that correctly. From our avatar president’s Twitter feed:
The last line tells us how Democrats define “costs zero dollars.” It “adds zero dollars to the national debt.”
First, they don’t know that. The Congressional Budget Office (CBO) hasn’t scored anything yet because no one knows what the actual bill looks like. It is the subject of a big fight between Democratic “liberals” (some erroneously call them “moderates”) and the Democratic left (some call them “progressives”). And you are unlikely to see their score until after the bill is enacted, at least in the House.
But suggesting that government spending especially on this scale somehow costs zero dollars is like saying a rental house costs zero dollars because renters pay enough rent to cover the owner’s mortgage. The owner may have an even cash flow on his or her property, but someone is paying. And that pesky mortgage! And God forbid you need to repair something, like a roof, or more.
Which, in the case of the $3.5 trillion “Build Back Better” budget act, means you pay. Businesses that pay these taxes pass them off to their consumers in the form of higher prices. Taxes are a cost of doing business. But we’re now getting ahead of ourselves. More about this later.
But here’s what that $3.5 trillion hosing of money into our economy really means, especially on top of some $5 trillion from the previous “stimulus” bill, and not including the $1.1 trillion bipartisan infrastructure bill:
Economic law #1: When too many dollars chase too few goods, inflation happens.
Inflation is already up to an annualized rate of 5.3%, the highest it has been since the Reagan administration. “The Squad” and its 30 or so followers in the House “progressive caucus” don’t think $3.5 trillion is enough, by the way. They wanted $6 trillion. That was their starting point, and they’re kinda done negotiating. They feel somewhat empowered by years of the Federal Reserve Board spending tens of trillions — money out of thin air — to buy bonds. It has kept interest rates remarkably low.
Inflation erodes the value of your savings. It erodes the value of your paycheck. You pay more for goods and services. Just ask the people of Venezuela.
According to economist (and personal friend) Brian Wesbury of First Trust Portfolios in Chicago, Modern Monetary Theory is apparently the Democrat’s governing economic principle, which is neither new nor has proven successful.
Some think that Modern Monetary Theory (MMT) allows the Fed to print money to finance this debt with no consequences. This is delusional, and we agree with Mervyn King, the former head of the Bank of England who says MMT is neither modern, monetary, or a theory. It’s been tried before, by the Romans, the Weimar Republic, Zimbabwe, Venezuela…all with disastrous results.
Satire site Babylon Bee further demonstrates the absurdity of the “costs zero dollars” claim.
Quedando had originally told her husband she would be spending $3.5 trillion at Target on prairie dresses, shoes, Magnolia decor, “a few things for the kids,” groceries, knick-knacks, throw pillows, and candles, among other “small” purchases. When this proposal didn’t poll well among her husband base, she quickly released a statement that the $3.5 trillion in spending would “actually cost $0 when you think about it.”
According to Quedando, when you look at how many coupons she used, the deals she got, and the fact that she put everything on her Target credit card, the total cost of her massive purchase was actually “a wash.”
“Honey, think about it this way,” she said as she got home with 50,000,000 truckloads of stuff from Target. “If we didn’t buy this stuff, we wouldn’t have saved all that money by scanning every item in the Target app. Then we would have saved $0. This purchase actually ends up being an even trade off.”
At publishing time, Quedando had claimed they’d actually made money on the purchase, since American dollars are depreciating so rapidly that all the home decor she bought would actually retain value better, and her husband had to admit she had a point.
The fictional Ms. Quedando could be a Democratic member of Congress, even Squad worthy.
Oh sure, President Biden claims that no one who makes under $400,000 a year will pay any new taxes. And only the wealthy will pay the taxes necessary to cover this spending over an estimated 10 years. Reminder: The spending happens faster than the tax revenue, especially as an election nears.
But we do not yet know what taxes will ultimately be included. Democrats want to raise the top marginal rate to nearly 40%, along with corporate income taxes back up to 29%. But other taxes may be in the offing that you’re surely going to pay for, ultimately, including talk of a $15 per ton carbon tax on oil and gas producers. The prices you’re paying at the pump today, already 30% higher than when Biden took office, will look like the good old days in a few short months if enacted. “But you’ll get rebates,” Democrats will claim, so long as you buy electric cars and whatnot. Don’t believe them.
It probably won’t pass because Sen. Joe Manchin, the Democrat from coal-producing West Virginia, is against the idea.
Another exposition of economic illiteracy comes from White House Press Secretary Jen Psaki, who posits:
Economic law #2: Businesses do not pay taxes, which are a cost of doing business that is priced into their goods and services. In other words, you pay the cost for higher taxes in the form of higher prices.
Economic law #3: The wealthy pay a much lower percentage of their “income” in taxes because a) they invest their money to grow it and protect it from taxes, and b) they hire or can access smart financial advisers who show the way.
These two laws are related because they deal with the same issue — how businesses and business owners and investors — especially the wealthy. They have the ability, as tech investor Peter Thiel did, to put billions into “tax-free” IRA accounts, or park millions more into “donor-advised funds” to get upfront charitable tax deductions not yet made but “parked” for the future.
It’s also a fact that we pay taxes on our income, but not our “wealth.” And that makes sense. You actually use and spend your income; your wealth hopefully grows. But until you use your wealth, it can grow (or not) without tax consequences. That seems fair.
Far-left senators like Elizabeth Warren and Bernie Sanders (who is the author of the $3.5 trillion spending plan) want to tax wealth AND income. If you open the door to taxing wealth on top of income, it becomes double taxation. While the wealthy may be first in line, if you own your own home or have saved and invested well over a career, you will eventually look wealthy to Sens. Warren and Sanders, along with their friends in The Squad.
Economic law #4: The more you tax something, the less you get of it.
But here’s the deal. One of the reasons companies like Amazon don’t pay much in taxes is that they reinvest in their business. Those investments are tax deductible: things like people, new warehouses, etc. You know, things that create jobs.
Raising taxes on investments will result in less investment, fewer jobs, and slower growth.
None of this is rocket science. Those of us who are on “Team Reality” know all this instinctively. Yet our government elders live in an alternate universe. You know, like where a $3.5 trillion spending bill — more than we spent to fight World War II — costs zero dollars.
When you next vote, whether in Virginia or elsewhere, send them a message. Vote Team Reality. Do NOT vote for a Democrat.
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My cynical side is flaring up. Thank you for the rational, realistic and factual post. It matters not. This atrocity will be passed. Our children, our grandchildren and their grandchildren will have this albatross – this lead weight of debt, combined with rampant inflation – tied to their necks for their entire existence, while this once magnificent country rapidly declines into something resembling Venezuela or worse.
I fear that my cynical side is optimistic…
“Avatar” is too kind.
“Check out my new Lamborghini.”
“How much did it cost?”
“It didn’t cost anything, I bought it with my kids college fund.”
That’s because they view your money as their money.
The problem is that while a select few care about how this gets paid for in the future and what it will do, etc. Most just care for what they get out of it for them and let the future take care of itself. It is free money from thier point of view and they will not have to pay for it or if they do it will be less than what they get now.
I guess Joe is saying the debt ceiling does not need to be increased. Sounds good Joe.
There are two hard-nosed reasons for this retarded claim — I think.
First, as FJG points out, there may be some debt-ceiling dodge they are aiming for.
Second, IIRC, a bill can only be passed through reconciliation if it costs zero dollars. Hence the claim. ObamaCare was never going to happen the right way, so they rigged the numbers (counting ten years of receipts against six years of costs) to arrive at a zero figure (which was still laughable, but the CBO was in on the joke). And then Barry farted it out through his ear.
So watch Joe’s ears.
While the Joe Biden era is proving to be irresponsible and dangerous as hell, it is non-the-less good for the entertainment value and a good laugh:
It may be irresponsible and dangerous as hell but I suspect he will go down as one of the greatest POTUS of modern times. The victors will see to that.
I suspect many are aware of the myth of the wealthy not paying their “fair share,” but here’s a fine article and chart on the topic.
I think they just don’t care to understand the truth, or the implications. It’s like Monopoly money to them, like kids playing a board game. And they just make up something that they think sounds good, regardless of whether it is factual. Good post, Kelly.
I gotta keep that on speed dial.
I feel like a fool. When 0bama was first president, a woman was videoed being asked where does the money come to pay for her 0bamaphone. She said, “I don’t know. The government makes it.” And I thought, How stupid!
Well, she was tight and I was wrong.
I have that about a lot of things. I used to believe truth, science, law, justice, etc. It was not until later I realized that it is all smoke and mirror with emotion, lies, power and force rule the world.
Ring, Ring, Ring, Ring, Ring, Ring, Ring, Ring…OBAMAPHONE (obamaphone)!
You should read Dune once a year. It’s all about who controls the spice.
You Lie!
This is the full costly agenda of Obama’s destruction of America … just ask Nancy.
Part of this is also public relations. Manchin and somewhat Sinema have said $3.5 trillion is too much to spend. The Administration is trying to show that Manchin is wrong and should vote for this, they need his vote even to get through reconciliation.
But…. Democrats can also be the stupid party. One of the things they are trying to add to the bill is a Carbon Tax. They say this will raise a trillion dollars and would help them pay for the bill. A Carbon tax is a tax increase on every person in the country hidden as increased prices rather then a tax bill.
To get Manchin and use reconciliation they need to “pay for” the bill. To pay for it they want to tax carbon. Manchin is a moderate Senator from Coal Country. Paying for extravagant inflationary spending by taxing the industry in his state is not going to get his vote.
https://thehill.com/homenews/senate/574175-manchin-raises-red-flag-on-carbon-tax
The only relevant question is whether the Chinese already control them. If they do what is the cost of leaving, forming a new country on the existing constitution, or the previous one, and take most of the Colonels and below as defense? The equipment is already in the safe places, they’re used to leaving military equipment to whoever holds the ground.
Is it illiteracy or or just lying? The greatest threat is not in the lie itself, as egregious is it is (they are), it’s how many willingly accept and comply, i.e. the useful idiots. The Left’s idea of unity is capitulation. Is it naiveté? Is it some perverted form of peer pressure? Intellectual laziness?
I seem to be abusing this phrase but cognitive dissonance seems the best description – such an overwhelming desire to believe a deep-seated belief is true, one will assume even the most absurd and irrational thought processes to confirm held belief. Extended time spent in this suspended reality, where what you belief does not line up with what is observed, will begin to affect mental health, manifesting in psychopathic behaviors. It partially explains the insanity of the Left.
Perfect example, %75+ of Demo
ncrats still think Donald Trump complemented white supremacists after Charlottesville…30 more seconds of video explicitly betrays “The Chris Wallace gang’s” narrative as absurd but still widely accepted. I must ask why?Linked this post in my Chicago Boyz post Paying for Biden’s Dreams.
How many members of Republican, Inc. will be just fine with this?
Republicans will be fine with some of it. The debt ceiling will be raised at some point and the bi-partisan infrastructure bill already has Republican votes. There will be some form of continuing resolution.
The big bit, the $3.5 trillion, I think/hope that this will not get any Republican Support. They want to run on the ridiculous stuff in the bill/spending/inflation or on the fact that the Dems failed to pass it (can’t lead) so they don’t want to help them. McConnell has been doing a decent job of keeping his group together, I have not seen any stuff from Murkowski or Romney saying they want to vote for this. So far they have not jumped ship on the debt ceiling or anything beyond infrastructure.
They’re just trying to triangulate passing the bill. Every penny of it will be passed.
Federal Infrastructure = bigger threat to liberty than the Taliban.
I need one of these wallets, where I can pay for things and it does not cost anything because I’ve paid for it.
“The bill itself will not cost $3.5T in the sense it will be entirely, or at least partly, paid for. So the actual cost will be smaller than that, perhaps zero, although I think that’s unlikely”
I’ve been wondering what’s happened to the revelations from the highest Chinese defector ever that occurred earlier this year. Obviously I wouldn’t expect to see his 4 terabytes of information on who’s been bought in the government, academia, and the Press, but I get the feeling that information is now resting beside Hunter’s hard drive.
Most
What a bunch of malarky.