Democrats deny basic economics


The simplest way to understand economics is that it is a calculation with inevitable tradeoffs. If you spend money on something, you can get something back, but you lose the ability to use those resources for something else. In the world of politics, economics helps us assess the merits of these compromises. It answers the question: do the benefits of a policy outweigh the costs? Sometimes the benefits are greater. Sometimes they are thin or even nonexistent. But there are always costs. To recognize this is simply to recognize the reality.

Under President Joe Biden, however, Democrats in Washington decided they could just wish those compromises removed by stating that they didn’t exist. Time and time again, they have argued that their policies do not or should not have costs.

Just this week, for example, White House press secretary Jen Psaki responded to a question about the fiscal impact of the $ 3.5 trillion spending plan currently underway in Congress stating that “there are … who claim that in the past, companies passed these costs on to consumers … we think it is unfair and absurd and the American people would not tolerate it. ”

When taxes are levied on corporations – the “businesses” in Psaki’s answer – corporations often respond by passing that tax on to others. In some cases, they pass the costs on to consumers. In others, like Scott Lincicome of the Cato Institute ironically Twitter notes, they reduce the amount they would otherwise have spent on wages. They have to pay more to do business, so they make adjustments accordingly. Costs create consequences and trade-offs.

Empirical research constantly showed that a large portion of corporate tax increases are actually paid for by labor down the line. There are reasonable academic debates over the precise percentage of tax paid by labor, and how that might change under certain circumstances. But there is little real debate about whether or not some of the costs are passed on. The fact is that it happens. Workers, not owners, pay at least some of the higher corporate taxes.

Yet Psaki’s position – the Biden White House’s position – is that this sort of thing is “absurd and unfair.”

One might think that the omnipresence of gravity is unfair and absurd. Nonetheless, not many people plan their lives around the ability to jump in the air and fly whenever they want. We accept reality and make plans around its constraints, however absurd or unfair they may appear. To do otherwise would be foolish.

Yet that is essentially what Democrats are doing as they strive to push through the Biden agenda. They insist that their plans, which are still evolving but represent a call for some $ 4 trillion in spending on two bills, have no real cost – or that the costs should not be factored in, because they are “unfair and absurd.”

As recently as last week, Biden himself tweeted that the $ 3.5 trillion spending bill wouldn’t actually cost $ 3.5 trillion. Instead, its real price looked like nothing at all. “We’re talking price tags. It’s zero price tag on debt,” Biden noted of a White House podium. “We will pay for whatever we spend.”

Biden’s remarks came after a week in which Congressional Democrats found themselves at a stalemate over their spending plans. In response, they decided that the problem was not with the plans themselves, but with the messages. The first posts for the biggest bill, which mostly focus on welfare state expansion and climate policy, revolved around the $ 3.5 trillion figure, which Democrats had seen as a sign of how much. they wanted to commit to their program. But the size of the overall spending became a point of contention with the moderates, who rightly feared that $ 3.5 trillion was a lot of money – probably too much many.

Some Democrats have admitted that the final legislation will likely end up being cropped. But some supporters of the spending bill, like Sen. Bernie Sanders (I-Vt.) Have continued to insist that there is nothing that can reasonably be cut. After all, the $ 3.5 trillion figure was itself a compromise of their initial request of $ 6 trillion.

So Democrats and their supporters in the press focused most of their energy on changing the way they describe The legislation.

As a result, we have had trials attempting to minimize the cost with titles like: “$ 3.5 trillion is not a lot of money“(New Yorkk journal) and “It’s not really a “$ 3.5 trillion” bill“(The New York Times). And then, of course, there were the official statements from Biden and White House communications officials making complaints like “it’s just a fact” that the plan “adds $ 0 to the debt”.

It is not “just a fact”. It is, at best, a risky projection. And like Raisonby Eric Boehm a Noted, this may not even be the case, in part because the legislation in its current form is structured by timing gimmicks meant to incentivize additional spending over time or start spending late in order to hide the cost in the long run and on paper of the plans.

But in some ways, this is all irrelevant. It is a plan that, in its broadest form, involves spending $ 3.5 trillion. Even in the unlikely event that such a plan really turns out to be fully paid off, he would spend another 3.5 trillion dollars. These economic resources would be used to do certain specific things, which in turn would reduce the ability to do other things. In other words, there would be costs and trade-offs.

Changing the description is just one way of getting rid of these costs, of thinking that it is possible to make them go away by saying that they aren’t real or shouldn’t matter. Under Biden, this was the path for Democrats, especially the self-identified progressives, who have implicit that large increases in the minimum wage might not cost jobs (they would like) and that federal spending constraints induced by debt and deficit are indeed not real (they are). The intention in all cases is to minimize concerns about the real existence of significant tradeoffs. After all, the costs and trade-offs are absurd and unfair. May be. But they are also real. And lawmakers ignore them at our peril.


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