After President Biden’s American Rescue Plan resulted in record inflation levels and dramatically hindered the rate of job recovery after the pandemic, analysts have predicted Biden’s American Families Plan will add 21 million Americans to federal entitlement programs. Hoover Institution fellows JohnMore
After President Biden’s American Rescue Plan resulted in record inflation levels and dramatically hindered the rate of job recovery after the pandemic, analysts have predicted Biden’s American Families Plan will add 21 million Americans to federal entitlement programs.
Hoover Institution fellows John F. Cogan and Daniel Heil discussed their recent analysis in an article for the Wall Street Journal, they began, “The federal government’s system of entitlements is the largest money-shuffling machine in human history, and President Biden intends to make it a lot bigger.”
The analysts wrote, “For the first time in U.S. history—except possibly for the pandemic years 2020 and 2021, for which we don’t yet have data—more than half of working-age households would be on the entitlement rolls if the plan were enacted in its current form. Contrary to Mr. Biden’s assertion that his plan ‘doesn’t add a single penny to our deficits,’ his plan would add more than $1 trillion to the national debt over the next decade.”
The analysts point out, “These programs extend eligibility for benefits high up the income ladder. Two-parent households with two preschool-age children and incomes up to $130,000 would qualify for federal cash assistance for daycare. Single parents with two preschoolers and incomes up to $113,000 would qualify. And some families with incomes over $200,000 would be eligible for health insurance subsidies. Other parts of the plan, such as paid leave and free community college, have no income limits at all.”
“Our analysis shows that the American Families Plan would add 21 million Americans to the list of federal entitlement beneficiaries,” they continued. “With these additional recipients, 57% of all married-couple children would receive federal entitlement benefits, and more than 80% of single-parent households would be on the entitlement rolls.”
Biden’s American Rescue Plan which was passed in March was similarly devastating to the economy, with inflation levels reaching a 13-year high in April, a record that was broken again in May. These levels have been more than double the highest projections made in a Bloomberg survey of economists.
Additionally, Biden’s economy underperformed by adding nearly 750,000 jobs less than expected in April, the month after the American Rescue Plan was passed. Forbes reported, “The United States added 266,000 jobs in April, according to data released by the Labor Department Friday—much worse than the 1 million job gains economists expected and far fewer than the 916,000 jobs added in March, indicating that the long-tepid labor market recovery is slowing down again even as stocks and corporate earnings rip higher.”
Nine countries are rejecting the Biden administration’s push for a “global minimum tax” for corporations.
According to Fox News Business, “130 of the 139 countries in the Organization for Economic Cooperation and Development agreed to a long-sought conceptual framework to overhaul the global tax system, including a minimum rate of at least 15% on multinational corporations, regardless of where they operate. But nine countries – Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Sri Lanka, St. Vincent, Peru and the Grenadines – did not sign the tentative framework.”
The rejections by Hungary, Ireland, and Estonia are particularly threatening to the deal, as the European Union requires unanimous consent for its adoption.
According to Chris Edwards, the Director of Tax Policy Studies at the Cato Institute, “Smaller countries tend to have lower corporate tax rates because they know that they need to be welcoming to investment to compete with giants such as the United States.”
Paschal Donohoe, Ireland’s finance minister, gave a similar explanation during a speech in April, “I believe that small countries and Ireland is one of them, need to be able to use tax policy as a legitimate lever to compensate for advantages of scale, location, resources, industrial heritage and the real, material and persistent advantage enjoyed by larger countries.”
The policy was endorsed by President Biden and other world leaders during the G7 meeting last month. The White House said the policy is “a critical step towards ending the decades-long race to the bottom that pushes nations to compete over who can offer the lowest tax rate to large corporations at the expense of protecting workers, investing in infrastructure, and growing the middle class.”
The White House did not explain how depriving corporations of the funds they use to pay their employees benefited workers. Further, the middle class has been shrinking as a result of the upper-class growing. The Cato Institute reported, according to U.S. Census Bureau data, “in 2018, over 30 percent of U.S. households earned over $100,000 (i.e., the upper class). Fewer than 30 percent of households earned between $50,000 and $100,000 (i.e., the middle class). The share of U.S. households making at least $100,000 has more than tripled since 1967, when just 9 percent of all U.S. households earned that much (all figures are adjusted for inflation).”
“In 2018, the share of households earning less than $50,000 (i.e., the lower class) dropped below 40 percent for the first time since the U.S. Census data on this metric started to be collected in 1967. Back then, 54 percent of households earned less than $50,000,” they continued.
Senate Majority Leader Chuck Schumer (D-NY) announced Wednesday that he will be meeting with all 11 Democrat members of the Senate Budget Committee in order to start the “reconciliation process” for President Biden’s massive spending plan, which partially funds infrastructure.
“Tomorrow I’m convening a meeting with all 11 Democratic members of the Senate Budget Committee regarding a fiscal year ‘22 budget resolution,” Schumer said. “Now that President Biden’s fiscal ‘22 budget request has been received by Congress, the Budget Committee can begin the important work of producing a budget resolution.”
Biden’s budget is nearly $6 trillion and includes $4 trillion in additional spending. Fox News reported, “To fund the various proposals, Biden has pushed for a slew of tax hikes, including raising the corporate tax rate to 28% from 21%, nearly doubling the capital gains tax rate paid by wealthy Americans to 39.6% from 20%, restoring the top individual income tax rate to 39.6%, closing the stepped-up basis at death and imposing a global minimum of 15% on U.S. companies foreign profits.”
Less than 1/3 of Biden’s budget is to be spent on infrastructure, and the proposed tax hikes are expected to dramatically reduce employment and wages. According to the nonpartisan Tax Foundation, “We estimate that Biden’s spending proposals would increase long-run GDP by 0.3 percent, due to enhanced public infrastructure. However, this positive economic effect is entirely offset by the increase in corporate and individual taxation, resulting in less work and investment, which in combination with the spending reduces GDP by 0.9 percent in the long run, reduces wages by 0.8 percent, and eliminates 165,000 full-time equivalent jobs.”
Schumer’s announcement comes after new data from the Labor Department reveals that the Biden economy has continued underperforming, hitting record level inflation for multiple consecutive months and employment numbers well below the worst predictions from economists.
In May, President Biden’s policies pushed the rate of inflation to break records set the previous month, reaching the highest level since 2008 and again performing worse than economists predicted.
The New York Times reported, “The Consumer Price Index surged 5 percent in May from a year earlier, the Labor Department said on Thursday. Economists had expected an increase of 4.7 percent. Prices rose 0.6 percent from April to May, and an index that excludes volatile food and energy costs rose 3.8 percent from a year earlier, the briskest pace since 1992.”
Top Democrat economist Larry Summers told PBS’s “Firing Line with Margaret Hoover” last week that the Biden administration’s “stimulus” bills have driven the inflation.
“If you looked at how the economy was coming into this year, we had total wages and salaries coming to people were 20 or 30 billion dollars a month lower because many of them had to be home because of COVID and the economy was slowed,” Summers said. “But we put in a stimulus that was putting into the economy more than 200 billion dollars a month. And so when you take a hole and you overfill it, you’re likely to have problems.”
“And I think we know that inflation’s like a lot of other things, it’s a lot easier to prevent than it is to cure,” Summers continued. “And I think the credibility of policymakers, including those at the Fed, is much easier to preserve than it is to restore.”
He later added, “The main risk is that our economy’s going to overheat. And then once it overheats, it’s going to be hard to put out the fire without doing a lot of damage and causing a lot of problems. And so I’d like to see us shift towards a policy concern.”
Red states that avoided or minimalized COVID-19 lockdown measures are leading the country in economic recovery, with some states outperforming their pre-COVID-19 numbers.
According to the Back-to-Normal Index created by CNN Business and Moody’s Analytics, South Dakota, Florida, and Nebraska are performing at 106%, 101%, and 100% of their pre-COVID-19 numbers, respectively. The United States on average is performing significantly worse than pre-COVID-19 numbers, with recovery only at 91%.
A statewide lockdown was never put in place in South Dakota, and both Florida and Nebraska were among the first states to remove their lockdowns. Of the three states, South Dakota is the only one with a higher per capita COVID-19 death rate.
In comparison, the three states with the highest death rate for COVID-19 are New Jersey, New York, and Massachusetts, all states that voted for Biden in 2020. The three states are performing below the United States average, with performance at 90%, 79%, and 84%, respectively.
While blue states have managed to inversely correlate their death rates with their economic recovery, Republicans have pointed out the uselessness of lockdowns to combat overall mortality.
“We will never do any of these lockdowns again, and I hear people say they’ll shut down the country, and honestly, I cringe,” Republican Governor of Florida Ron DeSantis in August. “And at best, what the lockdown will do is delay. It does not reduce the ultimate mortality… it creates a lot of other problems with mortality that a lot of people don’t necessarily focus on.”
Republican Governor of South Dakota Kristi Noem made similar statements in late 2020, saying, “As you all might imagine, these last seven months have been quite lonely at times. But earlier this week, one very prominent national reporter sent me a note that said, ‘Governor, if you hadn’t stood against lockdowns, we’d have no proof of just how useless they really have been.’”