End of a Myth

The House just passed a version of President Biden’s “Build Back Better” bill. Only 1 Democrat, Jared Golden of Maine, voted against passage. He did so because he opposed a provision in the bill that raised the SALT cap retroactively from $10,000 to $80,000. 

The House vote finally and unequivocally explodes one of the more cherished myths of the punditocracy, namely that there are “moderates” among elected Democrats. Consider what the party just voted for after having already voted to spend $1.9 trillion for “COVID relief” in March, and an additional $555 billion for infrastructure in early November. And that is on top of the regular federal budget of about $4 trillion. 

The House bill nominally spends an additional $1.85 trillion over 10 years to greatly expand the welfare state. It includes a program of universal pre-kindergarten, child care subsidies that extend well into the middle class, more financial aid for college, billions more for housing, expansion of Medicare with a new hearing benefit, and (of course) price controls for prescription drugs. 

Democrats claim the bill will “only” cost $1.85 trillion. But of course the cost will be higher; in fact much, much higher. The Committee for a Responsible Budget estimates the  true cost of the bill to be as high as $4.9 trillion. According to the National Taxpayers Union (NTU), the Wharton School of the University of Pennsylvania earlier came up with an estimate of $4.13 trillion. 

The reason for the difference between the estimates produced by the Congressional Budget Office (CBO) and private forecasters is not the fault of the CBO. They are required to forecast based on a set of rules. The Democrats simply gamed the rules (as Republicans have done when they had the power). In brief, the Democrats only funded about 5 years of programs (hence the lower estimated costs) but increased taxes over the entire 10 year period (hence a reduced estimate of the deficit). 

But this maneuver fools nobody. Of course the programs will be renewed. As Milton Friedman once said, there is nothing as permanent as a temporary government program. The reason is simple. Program benefits are concentrated but costs are dispersed. The programs will naturally build up constituencies to defend them. Moreover the taxpayers are being deceived into believing that only “the rich” will have to pay higher taxes. So, they are told, for the vast majority the new programs are “free”.

However, lower and middle income earners will certainly pay for these programs, but the taxes will be indirect, by design. For example, corporations will be taxed more heavily. But corporations don’t actually pay taxes; they just pass them through in the form of higher prices for consumers, lower wages for employees and lower returns for shareholders. The mix of costs varies by industry and firm. But the middle class will pay one way or the other.

How about drug prices, that are now to be subject to price controls? The public will pay for that particular bit of economic illiteracy with the drugs that are not produced. Think about the COVID-19 vaccines that were produced in record time. That was (partially) the result of decades of research and development (including Intellectual Property) that was decades in the making. But the imposition of price controls lowers expected future profits while leaving development risks unchanged. The result is reduced capital commitment to R&D and fewer new life saving drugs discovered. 

Then there is the development of universal pre-kindergarten programs, funded by the federal government. Reflect for a moment on the irony. School boards across the country are erupting with parents protesting what the public schools are teaching their 7-year olds. Now Democrats want to unleash the bureaucrats who made such a mess of it on 3-year olds. 

The fact is, all but one of the House Democrats have voted in favor of a vast expansion of the welfare state. The programs in the bill are designed to create a subservient population easily subjected to the command-and-control whims of progressives. To accomplish that objective progressives lied about the cost, lied about the financing and handed out taxpayer financed gifts to their trade union allies, public sector unions, trial lawyers and high property tax blue states like, New York, New Jersey, California and Connecticut. 

With their votes for the Biden spending bill,  Democratic House members demonstrated beyond all reasonable doubt that there is not a single moderate  in the House Democratic caucus. Not one. 

JFB

Please follow and like us:

Leave a Reply