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We've Only Just Begun . . . to Spend

It’s beginning to look like the Biden spending spree, intended to cement his legacy as the second coming of FDR, is actually the biggest economic mistake in at least a generation. And, contrary to what you might think, it isn’t over.

Until Covid-19 arrived, the economy was in robust shape. The economy grew at a rate of 4.1 percent in 2019, real personal income was rising, unemployment was at historic lows, and inflation was a low 1.5 percent.

The pandemic posed a dramatic threat not only to health but also to our economy, and almost everyone agrees that it made sense for the federal government to provide relief of various types to Americans and to businesses, in full recognition that there would be waste, fraud and abuse, as there is with every government program.

But that’s not all the feds did, and it’s now widely understood that pouring trillions of dollars into an economy that was already supply-constrained served to dramatically increase the prices of commodities, goods and services, and thus we are living with much higher prices on almost everything.

This recognition helped kill Biden’s “Build Back Better” initiative to spend trillions more, and probably means Congress won’t be appropriating any more gigantic rounds of progressive expansionist spending.

But that doesn’t mean the harmful economic impact of the Biden spending spree is over. Not by a long shot.

As National Review’s Jim Geraghty reminded us last week, while trillions of dollars have been APPROPRIATED by Congress, that doesn’t mean it has shown up yet in the economy. In fact, most if not all of the $1.2 trillion in appropriated infrastructure spending has not been spent. The projects haven’t even started.

In 2022 the cost of construction materials rose by an astonishing 34 percent over the previous year. But that’s BEFORE an additional $1.2 trillion in infrastructure projects actually get started. Imagine the bidding war when 50 states and the federal government start contracting for huge new construction projects?

Some portion of the price hikes we are experiencing is due to monetary inflation, but the largest portion by far is due to demand for goods and services simply overwhelming supply, according to economist Jason Furman, former chairman of the Obama administration’s Council of Economic Advisors. And when over a trillion dollars of new infrastructure spending actually hits the market, it’s only going to get worse.