In the roughly one month since President Biden has been in office, he has tried to set the tone for where his Administration would set priorities. Actions are indicative of the person, and in economic policy President Biden has shown where his priorities lie.
In the last month, the President has announced that he will cancel the construction of the Keystone Pipeline that would bring oil from Canada to the US. He has proposed raising the minimum wage to $15. He has announced plans for trillions of dollars in new spending across several areas. He has announced that he will increase taxes to pay for the new spending. He has also begun to move aggressively to reduce the use of oil and other currently used fossil fuels.
For a moment, let us not look at the specific benefits and drawbacks of those exact issues. As a matter of fact, for the sake of this argument, let’s assume that each of those is the right choice. We set aside those considerations for this discussion, because there is a more important consideration at this point in the life of our country.
In the midst of an historic pandemic that has led to an historic economic challenge, the real consideration is if those are the right things to do right now? With the nation struggling with high unemployment (which hits disproportionately on lower income families), with the national debt higher than anyone would ever have imagined even a year ago and with projections that, even with new vaccines, that the country will still be struggling with these through at least the 4th quarter of this year, is this the time?
All of the above will have the effect of costing jobs and taking money out of the economy, either taking more in taxes or consumers paying more for things such as energy. On that there is no debate. Proponents of Biden’s plans say that it is worth the cost for reasons such as fighting global warming, or creating a more livable wage or other reasons. So, they argue, the cost is worth the better outcome. Again, for this discussion let’s assume all of that is true. But at a time when we are losing jobs at a rapid rate, when over 150,000 small businesses have closed their doors for good and when we are passing a stimulus plan to try to revive the economy and help the unemployed and hurting, is that the time to do all this?
The Keystone Pipeline has unions up in arms because of the thousands of jobs that will be lost. Biden has proposed a third stimulus plan to help put money in the hands of people to stimulate the economy but yet is also proposing new taxes that will take money out of the hands of people. The move from an economy that uses primarily oil and natural gas as fuel for vehicles and electricity to more ‘green’ energy will cost consumers in the trillions of dollars over the next ten years, taking money from an economy that is already struggling.
Last year, the US economy shrunk by roughly 3.5%. Each of the proposals above would further dampen economic growth. In a growing economy, with very high employment and wages growing, we could absorb impacts if there was a greater good. In an economy that has taken hit after hit, and is actually contracting, is that the right time to put additional strain on the economy and its people? Only if the ideology is more important than the economics. Biden’s actions indicate he believes just that.