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The Economic Damage of Biden’s Fiscal Agenda

Center for Freedom and Prosperity (CF&P) - Sun, 10/10/2021 - 12:37pm

President Biden’s fiscal agenda of higher taxes and bigger government is not a recipe for prosperity.

How much will it hurt the economy?

Last month, I shared the results of a new study I wrote with Robert O’Quinn for the Club for Growth Foundation.

We based our results on a wide range of economic research, especially a scholarly study from the Congressional Budget Office, and found a big drop in economic output, employment and labor income.

Most troubling was the estimate of a long-run drop in living standards, which would be especially bad news for young people.

Today, I want to share some different estimates of the potential impact of Biden’s agenda.

A study for the Texas Public Policy Foundation, authored by  E. J. Antoni, Vance Ginn, and Stephen Moore, found even higher levels of economic damage. Here are some main excerpts.

President Biden and congressional Democrats seek to spend another $6.2 trillion over the next decade, spread across at least two bills that comprise their “Build Back Better” plan. This plan includes heavy taxing, spending, and debt, which contributes to reducing growth rates for GDP, employment, income, and capital stock.  Compared to baseline growth over the next decade, this plan will result in estimated dynamic economic effects of 5.3 million fewer jobs, $3.7 trillion less in GDP, $1.2 trillion less in income, and $4.5 trillion in new debt. …There are many regulatory changes and transfer payments in current legislation whose effects have not been included in this paper but are worth mentioning in closing since they will have many of the same effects as the tax increases discussed in this paper. Extending or expanding the enhanced Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Tax Credit, and more, disincentivizes working, reducing incomes, investment, and GDP. Just the changes to these three tax credits alone are expected to cause a loss of 15,000 jobs… Permanently expanding the health insurance premium tax credits would similarly have a negative effect… Regulatory changes subsidizing so-called green energy while increasing tax and regulatory burdens on fossil fuels also result in a less efficient allocation of resources.

If we focus on gross domestic product (GDP), the TPPF estimates a drop in output of $3.7 trillion, which is higher than my study, which showed a drop of about $3 trillion.

Part of the difference is that TPPF looked at the impact of both the so-callled infrastructure spending package and Biden’s so-called Build Back Better plan, while the study for the Club for Growth Foundation only looked at the impact of the latter.

So it makes sense that TPPF would find more aggregate damage.

And part of the difference is that economists rarely agree on anything because there are so many variables and different experts will assign different weights to those variables.

So the purpose of sharing these numbers is not to pretend that any particular study perfectly estimates the effect of Biden’s agenda, but rather to simply get a sense of the likely magnitude of the economic damage.

Speaking of economic damage, here’s a table from the TPPF showing state-by-state job losses.

I’ll close by noting that you can also use common sense to get an idea of what will happen if Biden’s agenda is approved.

He wants to make the United States more like Western Europe’s welfare states, so all we have to do is compare U.S. living standards and economic performance to what’s happening on the other side of the Atlantic Ocean.

And when you do that, the clear takeaway is that it’s crazy to “catch up” to nations that are actually way behind.

Image credit: Gage Skidmore | CC BY-SA 2.0.

California to require ethnic studies for high school graduation

Liberty Unyielding - Sun, 10/10/2021 - 12:11pm

California has become the first state to require ethnic studies for graduation. “Ethnic studies in California…will move forward as a compromise between advocates who wanted an activist, anti-imperialist approach and those who asserted that the first version … was filled with radical ideology, obscure academic jargon and bias against capitalism,” reports the Los Angeles Times. […]

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New York City to abolish gifted and talented programs for children

Liberty Unyielding - Sun, 10/10/2021 - 12:13am

New York City will eliminate gifted and talented classes over the next five years, in the name of “equity.” “In order to have equal outcomes they eliminate the possibility for anyone to do better than the lowest common denominator,” said Richard W. Pickett. “This is tremendously stupid. My wife has been a gifted education specialist […]

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Child murders doubled this year in New York City

Liberty Unyielding - Sat, 10/09/2021 - 8:02pm

Murders of 0-17 year-old “kids doubled in NYC in 2021 compared to last year (as did fatal shootings),” notes John Hall. The Council on Criminal Justice sought to minimize the increased loss of life, by point out that murders of adults rose slightly faster. “Recent media reports have featured tragic stories about young victims of […]

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‘Wow!’: CNBC Hosts Can’t Hide Their Reaction To ‘Real Low’ Jobs Numbers

Liberty Unyielding - Sat, 10/09/2021 - 4:22pm

By Shakhzod Yuldoshboev CNBC hosts were surprised Friday to learn that the U.S. economy had added a “real low” number of jobs in September. “I see 194,000. That is real low,” CNBC’s Steve Liesman said of U.S. Bureau of Labor Statistics’ employment situation summary, adding that the consensus of economists had been around 500,00. “Wow!” […]

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Florida Education Board Sanctions Schools With Mask Mandates

Liberty Unyielding - Fri, 10/08/2021 - 12:29pm

By Laurel Duggan The Florida Board of Education is sanctioning eight school districts for imposing mask mandates without opt-out options in violation of an executive order. Board of Education Commissioner Richard Corcoran asked to penalize the districts by withholding funds equivalent to 1/12 of school board members’ salaries. He will also withhold the amount of […]

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Biden’s Dishonest Budget Gimmickry

Center for Freedom and Prosperity (CF&P) - Fri, 10/08/2021 - 12:18pm

Having been in Washington for close to 40 years, I’ve seen lots of budget dishonesty, but nothing compares to Joe Biden’s claim that his profligate budget proposals have zero cost.

According to the official numbers, that’s a $3.5 trillion lie.

In reality, as I noted in July, it’s much bigger.

Let’s investigate this issue. I’ll start by noting that I have mixed feelings about the Committee for a Responsible Federal Budget (CRFB). They think controlling red ink should be the main focus of fiscal policy, whereas I think controlling spending should be the top goal.

That being said, CRFB’s staff have a well-deserved reputation for being thorough and careful when producing fiscal analysis.

So it’s worth noting that the group estimates that the Biden’s fiscal agenda would actually cost between $5 trillion and $5.5 trillion over 10 years, much higher than the “official” estimate of $3.5 trillion.

Here are some of the bottom-line numbers from their report.

That’s a truncated version of their table. If you want to see all the gory details, click here.

You’ll also be able to read the group’s analysis, including these key excerpts.

While the actual cost of this new legislation will ultimately depend heavily on details that have yet to be revealed, we estimate the policies under consideration could cost between $5 trillion and $5.5 trillion over a decade, assuming they are made permanent. In order to fit these proposals within a $3.5 trillion budget target, lawmakers apparently intend to have some policies expire before the end of the ten-year budget window, using this oft-criticized budget gimmick to hide their true cost. …To fit $5 trillion to $5.5 trillion…into a $3.5 trillion budget, background documents to reporters explain that “the duration of each program’s enactment will be determined based on scoring and Committee input.”  In other words, tax credits and spending programs will be set to expire at some point before the end of the decade, in the hope that future lawmakers will extend these programs. …This budget gimmick…would obscure the true cost of the legislation

The Wall Street Journal opined about Biden’s gimmickry.

Democrats are grasping for ways to finance their cradle-to-grave welfare state, with the left demanding what they claim is $3.5 trillion over 10 years. The truth is that even that gargantuan number hides the real cost of their plans. The bills moving through committees are full of delayed starts, phony phase-outs, and cost shifting to states designed to fit $3.5 trillion into a 10-year budget window… Start with the child allowance… Democrats have hidden the real cost by extending the allowance only through 2025. Even if Republicans gain control of Congress and the White House in 2024, Democrats and their media allies will bludgeon them to extend the payments… Democrats are using a different time shift to disguise the cost of their Medicare expansion…delaying the phase-in of the much more expensive dental benefit to 2028. This “saves” $420 billion over 10 years, but the costs explode after that. …the new universal child-care entitlement…gives $90 billion to the states—but only from 2022 to 2027. …The bottom line: $3.5 trillion is merely the first installment of a bill that would put government at the commanding heights of family life and the economy for decades to come. Tax increases will follow as far as the eye can see.

Regarding the final sentence of the above excerpt, the tax increases in Biden’s budget are merely an appetizer.

Ultimately, a European-sized welfare state requires European-style taxes on lower-income and middle-class households.

In other words, a value-added tax, along with higher payroll taxes, higher energy taxes, and higher income tax rates on ordinary workers (with this unfortunate Spaniard being a tragic example).

But we do have a tiny bit of good news.

A small handful of Democrats are resisting Biden’s budget, which means the package presumably will have to shrink in order to get sufficient votes.

But this good news may be fake news if Biden and his allies in Congress simply expand the use of dishonest accounting.

Brian Riedl of the Manhattan Institute documents some of this likely dishonesty in a column for the New York Post.

How does Congress cut a $3.5 trillion spending bill down to $1.5 trillion? By using gimmicks to hide its true cost. …Progressives have been abusing these gimmicks from the start. They began with a reconciliation proposal that would cost nearly $5 trillion over the decade. Then, in order to cut the bill’s “official” cost closer to $4 trillion, the bill’s authors included a December 2025 expiration of the $130 billion annual expansion of the child tax credit… Of course, no one believes that Congress will actually allow the child tax credit to be reduced at the end of 2025… Democrats purposely selected for “expiration” a popular middle-class benefit that they know even a future Republican Congress or president would not dare take away from voters. …expensive child care subsidies, family leave, and “free” community college benefits may also have their full cost hidden with fake expiration dates early into the 10-year scoring window. Lawmakers fully expect to extend these policies later, ultimately raising the cost of the total reconciliation bill closer to the $3.5 trillion target (or even higher). …Progressives are also discussing delaying the proposed new Medicare dental benefits until 2028, which legitimately saves money within the 10-year scoring window but also hides a larger long-term cost.

I realize that it’s not a big revelation to write that politicians are dishonest (Washington, after all, is a “wretched hive of scum and villainy“).

And I also realize that that the main problem with Biden’s plan is the economic damage it will cause, not the reliance on phony accounting.

But truth should matter a little bit, even in a town where lying about fiscal policy is a form of art.

Image credit: Marc Nozell | CC BY 2.0.

Justice Department shouldn’t investigate parents for harsh rhetoric or creating bad publicity

Liberty Unyielding - Fri, 10/08/2021 - 12:11pm

Speech doesn’t become a “threat” just because a government official calls it that. Yet the National School Boards Association got the Justice Department to open an investigation, after labeling parents’ speech as “threats and acts of violence” when it occurred in controversies over “critical race theory” and “masking requirements” in the public schools. As the […]

The post Justice Department shouldn’t investigate parents for harsh rhetoric or creating bad publicity appeared first on Liberty Unyielding.

The Grim Economics of Higher Corporate Tax Rates

Center for Freedom and Prosperity (CF&P) - Thu, 10/07/2021 - 12:15pm

There are many reasons to reject Joe Biden’s proposal for higher corporate tax rates, and I listed many of them when I narrated this nine-minute video.

This two-minute video from the Tax Foundation has a similar message.

The main message is that workers, consumers, and shareholders are the ones who actually pay when suffer when politicians impose higher taxes on business.

And the damage grows over time because higher corporate tax rates reduce investment, which inevitably leads to lower wages.

By the way, while a low tax rate is very important, there are many other policy choices that determine the overall damage of business taxation.

This is just a partial list. There are other policies – such as alternative minimum taxation, book incomeloopholes, and extenders – that also can increase the damage of the corporate taxation.

The bottom line is that we know the sensible approach to business taxation, but the Biden Administration is motivated instead by class warfare and grabbing revenue.

P.S. For more information on corporate taxation and wages, click herehereherehere, and here.

P.P.S. For more information on corporate tax rates and corporate tax revenue, click hereherehere, and here.

Image credit: Vinícius Pimenta | Pexels License.

Education funding grows as students learn less

Liberty Unyielding - Thu, 10/07/2021 - 11:13am

Education spending has grown rapidly even as students learn less and less. As Reason Magazine’s Christian Barnard notes, “K-12 education revenues increased by 23.8%, or $3,005 per pupil, from 2002 to 2019. 12 states increased their per-pupil revenues by 30% or more. 11 more by at least 20%.” (That’s after adjusting for inflation). “Only two […]

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Biden Administration ramps up efforts to criminalize political dissent

Liberty Unyielding - Thu, 10/07/2021 - 10:06am

By Virginia Kruta President Joe Biden’s administration appears to be making a concerted effort to criminalize — and penalize — political dissent. The most recent step down that road came in the form of a letter from Attorney General Merrick Garland, indicating the Justice Department’s plan to coordinate with local law enforcement in order to […]

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Republican AGs join forces to warn Garland against ‘weaponizing’ FBI to target parents

Liberty Unyielding - Thu, 10/07/2021 - 9:48am

By Harold Hutchison Republican state attorneys general criticized Attorney General Merrick Garland for a memo ordering the FBI to get involved with alleged threats against local school boards. The National School Boards Association asked for such an intervention in September. Multiple attorneys general vowed to defend the rights of parents to be involved in debates […]

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Poll: Americans really don’t like Biden

Liberty Unyielding - Wed, 10/06/2021 - 5:27pm

“Americans really don’t like this President,” writes Charles C. W. Cooke in the National Review. According “to a Quinnipiac poll released today, Biden’s national approval rating is 38 percent. Among independents, it’s 32 percent, with 60 percent disapproving of the job he’s doing. Biden is nine points underwater among Hispanics, he’s six points underwater among […]

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Schools leave young boys behind with wordy curricula

Liberty Unyielding - Wed, 10/06/2021 - 3:53pm

The Wall Street Journal reports that “men are abandoning higher education in such numbers” that women now make up 60% of all college students, and there are 1.5 million fewer college students than there were five years ago. “I just feel lost,” said one young man. “Between 1959 and 2021, the number of male students […]

The post Schools leave young boys behind with wordy curricula appeared first on Liberty Unyielding.

How Free Markets Made Us Rich

Center for Freedom and Prosperity (CF&P) - Wed, 10/06/2021 - 12:12pm

Don BoudreauxDeirdre McCloskey, and Dan Hannan have all explained how capitalism enabled mass prosperity after endless stagnation and poverty.

There’s a similar message in this video from Kite & Key Media. The most relevant parts start at 2:30, though I recommend watching the entire video.

But if you don’t have time to watch any of the video, here are four of the key points.

  1. We are much richer, on average, than we were 50 years ago. This is a point I made both in June and September, and it’s worth adding that the all income groups tend to rise together.
  2. There was almost no growth for much of world history, a dismal reality that is beyond the comprehension of politicians such as Congresswoman Ayanna Pressley.
  3. Technological progress enabled by capitalism not only ended mass poverty, but it also brings many luxuries within reach of lower-income and middle-class people.
  4. As shown by basket cases such as VenezuelaLebanon, and North Korea, bad policy can wreck economic progress.

Regarding point #4, my only complaint with the video is that some viewers might conclude that economic growth will be automatic so long as politicians don’t make catastrophic Venezuelan-style policy mistakes.

It would have been nice to point out that, yes, the worst-possible set of policies produces the worst-possible economic damage, but also to explain that a modest amount of statism can hurt growth by a modest amount and a lot of statism can hurt growth by a significant amount.

In other words, there’s a spectrum of possible policy outcomes (I’ve also referred to this as the “socialism slide“) and it’s best to get as close to laissez-faire capitalism as possible.

Remember, even small differences in economic growth lead to big differences in long-run living standards. And the “size of the pie” is a good predictor of whether a nation enjoys broadly shared prosperity.

Image credit: Erik Scheel | Pexels License.


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