Congress in perspective: The stimulus check – The conservative

President Biden’s plan is founded on the erroneous assumption that “We can’t do too much here.” But the government can do too much; in fact, the Biden plan does so much that it’s counter-productive.

Firstly, the size of the stimulus package is disconnected from the underlying economic need. The nonpartisan Committee for a Responsible Federal Budget explains that the Congressional Budget Office (CBO) recently projected “that the nation’s output gap – the difference between actual economic activity and potential output in a normal economy – would be $380 billion for the rest of 2021 ... President Biden’s $1.9 trillion American Rescue Plan would likely be enough to close the output gap two to three times over.”

Even if their calculations are off, the CBO still reports a massive risk of overshooting the output gap, which could lead to a number of possible outcomes including, but not limited to, higher inflation, misallocations in the economy, an economic crash and a rise in deficits. Formulating public policy on the notion that the government cannot do too much is, therefore, a recipe for disaster.

A second problem with President Biden’s plan is its wasteful allocation of resources. The administration seeks to “deliver immediate relief to working families bearing the brunt of this crisis by sending $1,400-per-person checks to households across America.” But based on information from previous stimulus packages, researchers at the Harvard-based Opportunity Insights Team “estimate that households earning more than $78,000 will spend only $105 of the $1400 stimulus check they receive – implying that $200 billion of additional government expenditure will lead to only $15 billion of additional spending.” In other words, the proposed stimulus checks will be so inefficient at stimulating the economy because they’ll be sent to families that don’t need the relief.

Additionally, the Biden Administration seeks to “provide a $400-per-week unemployment insurance supplement to help hard-hit workers … through September 2021.” But as American Enterprise Institute economist Michael R. Strain points out, “[w]ith a $400 federal supplement, around 60 percent of unemployed workers would receive more income from their unemployment benefits than they would from working.” If adopted, this plan “would slow the recovery and keep the unemployment rate higher for longer than would be the case with conventional unemployment benefits.”

One final flaw of the Biden plan is the call “to raise the minimum wage to $15 per hour.” The CBO reported that implementing this proposal “would increase the cost to employers of producing goods and services.” Consequently, prices would increase, supply and demand would decrease, and employers “would tend to reduce their employment of workers at all wage levels.” This is patently counterproductive to the goal of building back the American economy.

There are good components of the President’s plan, such as expanding vaccine distribution and reopening schools. But these, along with a more targeted stimulus check program, can be accomplished by the more moderate $618 billion plan that a coalition of 10 Republican senators proposed earlier this month.