Biden’s boondoggle economics

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As the size of the federal government and its budget grows, everyone in America loses a little bit of liberty. Under small government, bounded by the rule of law and the embrace of free market capitalism, each person is free to pursue happiness as that person defines.

Under a big, dirigiste government, the state decides how capital is allocated and how we should speak and behave. The Biden administration, with its embrace of large deficit spending — the president’s actions have increased deficits by $4.8 trillion through 2031 — is undermining the economy and the fiscal foundations of the nation. Among highly populated nations, there is a correlation between the size of government and national prosperity. The per capita income of the United States is around $70,000. Our government spends about 30% of its national output. Germany, a wealthy nation, has a per capita income of about $52,000. In Germany, government spending ranges between 45% and 50% of gross domestic product. In turn, Britain and France are poorer than Germany. Government spending in Britain takes over 40% of GDP. In France, where per capita GDP is 30% lower than in the U.S., government spending exceeds 50% of GDP. Among wealthy nations, smaller government increases national prosperity.

PRICE CONTROLS ARE FOOLS’ GOLD

The most recent news from China drives home the message that big government suffocates the private sector, demands rigid conformity, and denies liberty. It is good news for the U.S. that China chooses the public sector over the private sector, but that choice is bad for the Chinese people. China is now completely entwined in the middle-income trap.

Nevertheless, the Biden administration and the Democrats openly choose the path of big government. They choose redistribution and economic equality over hard work and the pursuit of happiness. Democrats choose ideologically vested industrial policy over the invisible hand of capitalism. Democrats would confiscate the income of the most productive members of society, the 1% who already pay over 40% of all federal taxes, including imputed corporation taxes.

By definition, society wants more of what the most productive produce. Raising the tax burden on the 1% will result in less output by the most productive. Equally egregious, the Democrats would raise taxes on business to fund an ever-larger federal government. Return on capital falls. When business has less income, profit, business invests less. When business investment falls, then capital available for increased productivity falls. Moreover, when business taxes increase, capital flees to geographies where taxes are lower and capital returns are higher. Capital flows to the highest returns. Lower investable capital reduces investment in productivity-enhancing “tools” and strategies. Workers with access to more capital are more productive and command higher wages. Rising productivity is the keystone for an ever more prosperous and free people.

Put simply, Biden’s economic strategy isn’t just a boondoggle — it’s self-destructive to the national interest.

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James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on finance and the economy, politics, sociology, and criminal justice.

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Original Author: James Rogan

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