When President Biden, Speaker Pelosi, and Senate Majority Leader Chuck Schumer dropped nearly $2 trillion out of helicopters with the American Rescue Plan Act of 2021, Americans immediately suffered the highest inflation in 40 years. Inflation has remained high ever since.
Which brings us to the recent proposal to give $5,000 to every adult American citizen if Republicans hold both houses of Congress.
First, let’s examine the math. $5,000 for all 250 million adult U.S. citizens is $1.25 trillion. Factor in interest expenses over the next decade, and the price tag jumps to $1.8 trillion. That’s almost as much as the federal government has borrowed in the last year, which has pushed the total federal debt to more than $40 trillion.
The proposal is being framed as a “dividend.” What is a dividend? In business, it is the surplus – the profit – paid to owners (shareholders) when earnings exceed expenses, less retained earnings.
Is the federal government running a surplus? Not since 2001.
The federal government borrows so much that the debt held by the public is more than the value of everything produced in this country each year. That high-and-rising debt burden is driving stagflation: slower economic growth and elevated interest and inflation rates. It’s getting worse all the time and threatens us with the economic, security, and political catastrophe of a debt crisis.
No surplus exists. The money needed for the proposal would have to be borrowed. And the government would be borrowing a lot.
Remember, “government” money comes from taxpayers, by force if necessary. Government spending can only be financed by current taxes, future taxes, or the inflation tax, and all of them undermine prosperity far beyond the funds the government takes in. One way or another, we pay for every dollar spent.
Supermajorities of Americans of all political persuasions are already worried about federal deficits and debt. They understand that reckless borrowing drives stagflation and risks worse. They don’t want a handout. They want the federal government to get its act together.
The bond markets are getting jumpy. To everything there is a season, and the season for Congress to stand up and take full control of federal budgeting is nigh.
It is undeniably true that many Americans are getting squeezed by the cost of living. Inflation has been unusually high for more than five years.
Thank goodness congressional Republicans and President Trump enacted the Working Families Tax Cuts Act last year to prevent the largest tax hike in American history, clean up waste, fraud, and other big government nonsense, and empower Americans to choose more personalized health and education options. The Trump Administration has also done enormous good by removing nonsensical regulations: artificial barriers that hold people back.
But “stimulus” checks don’t make it easier to produce goods and services. When more money chases a relatively fixed amount of stuff, prices go up. This risks making an already tough situation worse.
Real economic dynamism means fixing broken federal, state, and local policies that stand in the way of people finding better ways to serve each other. It means letting people spend more time trying to solve problems and serve customers and much less time complying with a thicket of red tape.
More freedom can make housing, health care, energy, education, and much more work far better and be more affordable for all of us than it does today. That’s the path to prosperity. Not a one-time check that will push us deeper into debt and only fuel the inflation we need to get under control.
Kurt Couchman is a Senior Fiscal Policy Fellow at Americans for Prosperity.
