Alan Zendell, February 2, 2021
Despite Donald Trump’s ability to take over the news cycle, there are more critical issues on President Biden’s plate that involve saving and improving the lives of Americans. Getting people vaccinated against the pandemic as quickly as possible and providing financial relief for those drowning in COVID-related debt make Trump nearly irrelevant.
The debate over a new stimulus package has been predictable. Based on the recommendations of economists and health professionals, Biden proposed an aid package that’s really a bailout of the American people. But it’s different from other bailouts. The bank and automobile company bailouts invested taxpayer dollars to save industries considered too critical to our nation’s security to fail. The 2017 tax cut was also a bailout of sorts, a desperate rescue plan to prevent billionaires from slipping back into the ranks of mere multi-millionaires.
At the end of 2016, America had 620 billionaires worth $2.6 trillion. Two years, later, the tax cut and the stock market boom it generated had increased the number of billionaires to 788, worth $3.4 trillion. Trump and Congressional Republicans touted the tax windfall as a break for working Americans, although we now know nearly 90% of the benefits went into corporate stock buybacks and the pockets of the already wealthy, a continuation of the Reaganomics in the 1980s.
Proponents claim that cutting taxes for corporations and the wealthiest Americans (supply side economics) has a trickle-down effect on jobs and the prosperity of the working class. The argument between trickle-down and Keynesian economists has raged since the 1930s, when John Maynard Keynes proposed that increasing demand by average Americans would lead to full employment and prosperity. The way to increase consumer demand was to put money in the pockets of average Americans, which guided the economic policies of President Franklin Roosevelt.
Supply side economists promulgated the notion that the economy always does better under Republican administration, which Congressional Republicans cite in opposition to the $1.9 trillion price tag of Biden’s stimulus package. There’s no doubt that Biden’s proposal would stimulate the overall economy, as virtually every penny would immediately be reinvested in businesses and services. But in addition to being a stimulus, it’s a compassionate response to the suffering of millions of Americans who are out of work and unable to support their families.
In today’s edition of the New York Times newsletter The Morning, journalist David Leonhardt published a data- and fact-driven study that belies the idea that our economy does best in Republican administrations. Focusing on job creation and growth in Gross Domestic Product, he showed that exactly the opposite seems to be true. According to Leonhardt: “The economy has fared far better under Democrats. The gap…is ‘startlingly large,’” as illustrated below.
In the ranking of presidents by average annual GDP growth, Donald Trump is dead last.
The chart of growth in jobs is equally striking, showing that Presidents George W. Bush and Donald Trump rank last there as well. Trump is the only president since Herbert Hoover whose administration had a negative job creation rate, despite passing the tax bill. While some people blame the pandemic for Trump’s ranking, his mishandling of the pandemic was responsible for most of the downturn.
These results strongly suggest that our economy does better under Democrats who practice demand side economics. Biden’s proposed relief package would put badly needed funds in the hands of individual Americans, small businesses, and state and local governments. In true Keynesian fashion, virtually the entire $1.9 trillion cost would flow directly back into the economy.
Republicans object to spending so much on COVID recovery, claiming it would unreasonably increase our national debt, instead proposing to spend a third of what Biden requested, and ignore the needs of local governments and low end wage earners. That’s not only wrong, it’s completely disingenuous. The difference in the impact on the national debt of the two proposals can be offset by undoing the portion of the 2017 tax law that increased the wealth of the richest Americans by more than a trillion dollars in its first two years.
The differences in the competing stimulus packages have little to do with economic theory. The real issue is whether Democrats and Republicans can compromise on a bipartisan bill that represents a compassionate, responsible reaction to the needs of Americans. President Biden will strive for a bipartisan agreement, but in the face of greed-based opposition, he should and will use the budget reconciliation process to pass it without Republican support.