Social activists and much of the media are lavishing praise on the recently passed $1.9 trillion of new COVID-related spending. But the praise is misplaced because the planned expenditures are excessive and poorly targeted and ignore the economic recovery that is already underway.

In a Washington Post op-ed in February, economist Lawrence Summers estimated that the economy’s output gap – the difference between actual and potential GDP – will decline from about $50 billion a month at the beginning of this year to around $20 billion a month at the end. But Congressional Budget Office data suggest that the recent legislation will produce outlays of about $133 billion a month this year.

Many of the new $1,400 checks will go to individuals who haven’t lost any income. The $300-per-week extra unemployment payments will prolong joblessness because some recipients will make more by staying home. And a portion of the $350 billion for states and local governments will go to states whose revenues increased last year. A $618 billion Republican proposal took these considerations into account but was dismissed.

The Biden administration has belatedly acknowledged that massive COVID spending, which will raise this year’s deficit to over $3 trillion, has to be paid for and has begun floating proposals for significant tax increases. But bursts of profligate spending followed by tax increases that would depress longer-term investment and consumption is not a promising formula for sustainable growth.

Martin Jones
Freeport

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