Veronique de Rugy: The dwindling difference between our two parties on spending

By Veronique de Rugy Aug 18, 2022 @ The Northern Virginia Daily

Editor's Note:  I've enjoyed this author's views for some time, but I've not asked for nor received permission to publish this in full, but given all the recent events dealing with Vichy Republicans, I think this is an important piece.  If the author of the The Northern Virginia Daily object, I will break in down to a link.  RK

For a few years, I have sounded the alarm that a growing wave of conservatives are working to make Republicans indistinguishable from Democrats on social spending. Some say that to win elections, Republicans need to pay more attention to families — by which they mean dole out ever more money to families like the Democrats do. Exhibit A for this development is the newly reintroduced New Parents Act.

The Act was recently reintroduced by Sens. Marco Rubio, R-Fla., and Mitt Romney, R-Utah. It's a massive handout to parents, pretty much regardless of income level. If adopted, it would significantly expand the role of the federal government as it further swells the deficit and national debt.

The proposal has many parts, but two illustrate my point best:

First, it would create a federal paid-leave program that would allow new parents to advance themselves up to three months of parental-leave benefits today by drawing funds from their Social Security retirement benefits. This scheme is based on misconceptions that are hard to explain away. Romney and Rubio ignore the reality that the private sector, not the federal government, is the best provider of paid leave.

In fact, a majority of women today are paid during their leaves by their employers through various and flexible arrangements and programs. A government program would be unlikely to solve the issue of most concern to those workers who still do not have leave. That's in part because they work with a very small business, are self-employed or are temporary and/or part-time workers. By forcing the matter with all employers — no matter who eventually picks up the tab — it could cost this vulnerable group of women jobs and promotions, as we have seen in many countries with national paid-leave programs.

It is amazing that the senators would even consider using Social Security, a program that is already insolvent, to provide paid leave, and that they believe the advanced benefits will be repaid decades down the road. We can't tie the hands of future Congresses, and it's likely that future politicians will cave to the pressure to forgive these debts when they come due. When that happens, the cost to Social Security will become enormous.

Second is an extended child tax credit that goes to most families, even rich ones. The cost would be extreme. According to the plan, "Parents would receive a credit of up to $3,500 per child, and $4,500 per child for children under the age of 6." Imagine an enormous credit, fully refundable, with no work or marriage requirements. A family with four kids, for instance, wouldn't start paying taxes until they make over $118,000. Over time, the expanded CTC amounts to $69,000 per child. If you're concerned that this boondoggle might disincentivize work and marriage, you would be correct, as shown by the work of American Enterprise Institute economist Scott Winship.

The budgetary cost is astronomical, too. A friend of mine has six kids between the ages of 4 and 13. Both she and her husband work and are comfortable enough to have taken on the responsibility — and joy — of a large family. But as she recently told me, under the Rubio-Romney regime, "that would mean other people would have to pay $414,000 in taxes to support the family that I chose to have." The Act's elimination of the state and local tax deduction would do very little to recoup the cost.

It is unclear if some version of these handouts will be enacted. Democrats support the extended child tax credit, but they don't support using Social Security to deliver paid leave. (They prefer an even more expansive and distortive program, like the FAMILY Act.) However, the risks are high precisely because underneath each policy is an identical support for using the government to shell out money to every family, even if the evidence says it will backfire.

Between some conservatives and Republicans' push for federal family subsidies and their newfound embrace for bailouts and industrial policy, the difference between the Right and the Left on economic issues is narrowing significantly. If many more of them cave into the pressure from their more radical peers to reject economic liberalism altogether, the political transformation will be complete.

Veronique de Rugy's column is syndicated by Creators. 

China's Economy Is Struggling. Still Want to Emulate it?

  Veronique de Rugy

China's economy is struggling post-COVID-19. Growth is slower than expected, demographic trends are negative, youth unemployment is high, overbuilding has created a housing crisis and government indebtedness is ballooning. These are only a few of the symptoms ailing the country, and things could get worse. Did any of the Americans who not long ago wanted to implement some of China's top-down economic policies see this coming? Of course not. We've seen these pessimists make similar mistakes before........ The only question that remains to be answered is this: Why do we Americans always seem to believe those who tell us that industrial policy is a surer path to prosperity than economic freedom?.........To Read More.....

 

 

This Is a Pandemic of Fiscal Profligacy

Veronique de Rugy  – March 19, 2021 @ American Institute for Economic Research

 

Perhaps you’ve heard the story of the guy who – after jumping from the 50^th floor of a skyscraper – is asked how he’s doing as he falls past the 20th floor. “So far, so good!” he replies. That blissfully unaware individual headed toward his doom is, my fellow Americans, us. And we’re heading there not because Dr. Seuss Enterprises decided to stop the publication of six books. 

It’s because of increasingly extremist policymaking like the Democrats’ $1.9 trillion “American Rescue” plan, which has little to do with rescuing and everything to do with using the pandemic as an excuse to move the country closer to a progressive paradise. While it passed along party lines, the outrage from the Republican and its tabloid media sycophants was rather tame.

The latest $1.9 trillion addition to the federal debt is best described as a left-wing slush fund: extra generous UBI-like child allowances and child-care subsidies, four-figure checks sent to people financially unaffected by the pandemic, more Obamacare subsidies, bailouts for union pensions and airlines, and even more largesse for state and local governments that either don’t need it or don’t deserve it. Meanwhile, much of the GOP remains stuck in Donald Trump’s alternative reality TV show.  

I appreciate that people are becoming numb to the numbers, but we’re talking $1.9 trillion of debt-financed federal spending on top of four previous ostensibly Covid-related bailouts: $192 billion from the Families First Act; $2.2 trillion from the CARES Act; $733 billion for the Paycheck Protection Program Enhancement; and then $915 billion for the Response and Relief Act. That’s almost $6 trillion in “emergency” federal spending over the course of a calendar year. 

People should care about what this historical fiscal profligacy could mean for the country going forward. And it’s not just size – it’s scope. The left has made no secret of the fact that they’re using the pandemic as a means to a progressive end. In their America, all but a few would receive routine cash handouts from the U.S. Treasury while those few remaining aspects of our lives untouched by Washington’s tentacles would feel its grip. Leftist stalwart Bernie Sanders has proclaimed that Mr. Biden could be “the most progressive president” since Franklin Roosevelt.

People should care because the expansion or creation of programs under the guise of pandemic relief will likely become permanent. As Scott Lincicome notes, “[ARP] sets the stage for more and bigger changes—basic income, universal childcare, Medicare for All, etc.—in the future”. It certainly doesn’t help that Republicans have no credibility when it comes to fiscal responsibility, let alone advocating for smaller government. 

Worse, some of these traditional Democratic ideas are getting tacit support from Republicans who are producing their own technocratic variations. Never mind the sadly quaint notion that it is not the role of government to provide taxpayer-paid leave or send checks to almost everyone with kids. It’s Trump’s GOP now and that means vote-buying may as well be an official plank in the party’s platform. Never mind that there is a lot that could be done to remove federal, state, and local barriers that make life harder for individuals and their families. Instead, House minority leader Kevin McCarthy is busy recording himself reading “Green Eggs and Ham” while state and local Republicans remain preoccupied with the ex-president’s electoral fantasies.   

Very few seem to care that we’re closing in on $30 trillion in debt, the symptom of our insane spending. In fact, it has become fashionable to claim that we can borrow without fear of a debt crisis or of any consequences. Admittedly, one reason for this belief is that people like me have been warning about the mounting debt and the potential deleterious implications for years. But then there’s that oblivious fellow who jumped from the building, breezing past the 20th floor with a smile on his way to going splat.  

I like how John Cochrane puts it:

Yes, I’ve warned about this before, and no, it hasn’t happened yet. Well, if you live in California you live on an earthquake fault. That the big one hasn’t happened yet doesn’t mean it never will.  

As I wrote recently in a piece stating that today’s continued lockdowns weren’t the only tyrannical policy responses to the pandemic :

It’s also true that a full-on debt crisis may not happen for years. But that doesn’t mean that it won’t ever happen. Just looking at the numbers reveals the inevitability of such a crisis. Who will finance our debt when it reaches 300% of GDP? Who will finance the debt Uncle Sam will need to pay for the $101 trillion in unfunded liabilities accumulated by Social Security and Medicare? Debt crises take a long time to develop until they’re suddenly upon us.

And to those who argue that interest rates are low and are projected to remain low, Cochrane responds:

No, interest rates do not signal such problems. (Alan Blinder, covering such matters in the Wall Street Journal, “[i]f the U.S. Treasury starts to supply more bonds than the world’s investors demand, the markets will warn us with higher interest rates and a sagging dollar. No such yellow lights are flashing.) They never do. Greek interest rates were low right up until they weren’t. Interest rates did not signal the inflation of the 1970s, or the disinflation of the 1980s. Lehman borrowed at low rates until it didn’t. Nobody expects a debt crisis, or it would have already happened. 

We cannot tell when the conflagration will come. But we can remove the kindling and gasoline lying around. Reform long-term spending promises in line with long-run revenues. Reform the tax code to raise money with less damage to the economy. And today, spend only as if someone has to pay it back. Because someone will have to pay it back. 

Indeed, more debt today means more taxes tomorrow. And if interest rates take off, and thus the cost of financing all that debt, well, it won’t be pretty.

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Veronique de Rugy

AIER Senior Fellow Veronique de Rugy is also a Senior Research Fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist.

Her primary research interests include the US economy, the federal budget, homeland security, taxation, tax competition, and financial privacy.

She received her MA in economics from the Paris Dauphine University and her PhD in economics from the Pantheon-Sorbonne University.

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