Thursday, September 30, 2021

$3.5 Trillion=Zero Cost

Joe Biden and the Democrats have settled on a new approach in their attempts to pass a $3.5 trillion social spending bill for what they have called "human infrastructure".

They are now saying that it costs nothing---ZERO DOLLARS.

Wouldn't life be great if things worked that way?

You can spend all you want and it doesn't cost anything unless you go into debt.

You put down a 20% downpayment on a new house but that doesn't cost you anything. It is only the mortgage debt you take on that costs anything.

You pay for your child's college education. It costs nothing because your child did not take out a student loan.

You take a two week family vacation. It costs zero dollars because you pay cash for everything on the trip.

Of course, the sad reality is this is the way that Washington, D.C. thinks.

Everything really costs nothing if someone else is picking up the tab. Everything our politicians decide to spend money on, someone else is paying the bill.

Washington is largely a gigantic redistribution machine today. Money comes in one end from one group of people and it goes out the other end to another group of people. Requests from special interests comes in from one end and favors and advantages go out the other end. 

Money and wealth have been created in Washington because of the bureaucracy to run that machine and all of the politicians, lobbyists, lawyers and special interest groups working to get "their share" of money and advantages coming out of the other end.

Biden and the Democrats are not even attempting to cloak their social redistribution schemes in some high-minded political rhetoric this time.

The message being sent to their constituency is simple---we are going to take money from these evil corporations and rich people and give it to you---and it is not going to cost anything.

Of course, if this bill passes it will not cost zero dollars. It will surely add to the national debt.

The eventual spending will be vastly higher than the cost estimates in the bill.

The actual revenues from the tax increases will be much lower than the revenue estimates.

For example, when Medicare was enacted in 1965 the official budget estimate of the House Ways & Means Committee was that it would cost $12 billion in 1990 in inflated dollars. It cost $3 billion per year initially. The actual cost in 1990---$107 BILLION. The projected cost of Medicare in 2022---$766 BILLION.

Tax increases also invariably do not generate as much revenue as projected for the simple fact that people do not sit back and passively allow the federal government to take more of their hard earned dollars. I have written before about how the luxury taxes enacted in the early 1990's failed when "the rich" stopped buying airplanes. boats, jewelry and expensive cars and the end result was the loss of thousands of jobs of workers in these industries.

The Texas Public Policy Foundation, which is a non-profit, non-partisan research institute, estimates that the true cost of the Democrat bill is $6.2 trillion and the tax increases only cover $1.7 trillion. The TPPF further projects that the bill will result in a GDP loss of $1.2 trillion and the loss of 5.3 million jobs over time.

Even if somehow the cost and revenue estimates can be made to offset each other and prove correct, it still cannot be said that spending $3.5 trillion has zero costs.

Someone has to pay the bill. 

There is no free lunch. There is certainly no $3.5 trillion free lunch.

Someone has to expend the effort to create, innovate and produce something of value. Someone has to pay the bill. Someone has to produce something to pay the bill with.

The 20% down payment on your house or the college education you paid for was not free. It required work. It required savings. It required sacrifice. It was by no means cost-free.

My father used to tell me that nothing occurs in an economy until something is produced.  It might be an idea or a product but something has to be created and produced for the economic engine to run.  The service sector would not exist without this initial effort.  Most particularly, the public sector could not exist without the producers in the economy.  These producers make the society work.

It is much too easy to forget this lesson.  Or to simply ignore it.  You need to really stop and think about it.  I don't do it enough myself. 

Walk into a factory or a business that has been built from the ground up by an entrepreneur.  Take a look around.  The people that are working. The equipment that is in use.  The cars of the employees in the parking lot.  Then think about the spouse and children of the workers.  What is in their homes?  How come all of this is possible?  Who made it possible?  Who had the idea?  Who put their money at risk to make it happen?

Biden and the Democrats are misleading the American people by saying that $3.5 trillion can be spent with zero cost.


Right now it appears that Democrat Senator Joe Manchin of West Virginia is standing in the way of the $3.5 trillion spending package. Manchin called it "fiscal insanity".


I guess Manchin didn't get the memo that the $3.5 trillion would not cost anything.

However, Manchin apparently believes that $1.5 trillion in new spending would not be fiscal insanity. That is the number he has proposed as the maximum he would support in a new spending bill.

The economist Thomas Sowell once observed there are no solutions, there are only trade-offs.

There are no solutions, there are only trade-offs; and you try to get the best trade-off you can get, that’s all you can hope for.” 

$3.5 trillion in spending is not zero cost.

It is an awful lot of money.

In fact, ten years ago I wrote about an ambitious proposal from a group of Republican House members who were circulating a budget blueprint to cut $2.5 trillion in federal spending over the next decade.

Here we are a decade later and that $2.5 trillion in spending is still entrenched in the federal budget and Biden and the Democrats want to load another $3.5 trillion on top of it.

My suggestion to make that $3.5 trillion in new spending to actually be "zero cost" is for the Biden and the Democrats to propose $3.5 trillion in cuts in current spending to offset it. A true trade-off on spending. What is more important? For example, providing a subsidy for Amtrak, funding for the National Endowment for the Arts or providing greater subsidies for electric cars or having the federal government pick up the tab for almost all child care costs (the latter two are in the Democrat bill).

That is how it works with the people who pay the bills. If you want to go on vacation this year you have to trade-off something else you might want to spend money on. If you are a business you may have to forego expansion plans in order to pay increased health benefit costs for employees.

There are no solutions.

There are only trade-offs.

Why do Biden and Democrats suggest that there are no costs?

Isn't this what Joe Biden said during the 2020 campaign?


He wants to spend an additional $3.5 trillion and it will cost zero dollars?

Come on, Joe Biden!

Do you really think you are telling the truth here?

What is next?

If we end up with a $1.5 trillion human infrastructure is Joe Biden going to tell us that it not only does it not cost anything but we have just made $2 trillion?

It would not surprise me one bit.

We are living in very interesting times.

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