It has been done before.
How Are We Going to Clean Up the Biden Mess?
Look to a much older president for the answers.
Some people think the Biden federal spending spree has only yielded painful inflation and massive new debt. But some early data also suggest that, just as you might expect, at enormous taxpayer cost Bidenomics has boosted investment in areas the government is favoring, but not in the economy generally.
Let’s not sugar-coat it. America’s next president may have the toughest job anyone has ever had. Jason DeSena Trennert of Strategas details the bleak portrait of the federal fisc in a note to clients today:
It took Uncle Sam 232 years to accumulate its first $10 trillion in debt, nine years to accumulate its second, and five years to reach its third. The trip from $33 trillion to $34 trillion in debt was a short one, requiring only three months, from September to December of 2023...
If having $34 trillion in debt wasn’t enough, the Treasury department funded itself with short-term debt at a time of secularly low interest rates. More than one-third of America’s debt matures in the next year, resetting at higher rates and increasing the debt load by higher interest expenses alone.
The pain for future taxpayers is likely to be excruciating. And of course for current wage-earners it’s been no picnic. Mr. Trennert adds:
Strategas’ Common Man CPI of goods and services people must buy (food, energy, insurance, etc.) rather than what they might like to buy (appliances, vacations, etc.) shows that wages have trailed price increases by nearly 7% over the past four years.
The only possible way out of this mess is to encourage faster growth everywhere outside of Washington while somehow preventing growth within it. In short, we’re going to have to look to a much older president.
The scholars of the Calvin Coolidge Presidential Foundation make a pretty good case that their guy has the exact formula to cure what ails us. Here’s the Coolidge plan: Following an expensive pandemic and a surge in federal debt, restrain Washington and allow a technological revolution to enrich all of us..
William Beach writes in the Coolidge Review:
The period from 1919 to 1922 has striking parallels with our own time.
The 1919–1922 period had a significant pandemic—the influenza pandemic...
Both periods also brought a massive expansion of government budgets and publicly held debt... Federal outlays grew by 2,493 percent from 1916 to 1919. Why was that? Because we were fighting the Great War, and we went from low to extremely high outlays overnight.
Yet in 1923, federal outlays were still 340 percent higher than they had been in 1916. So although the war had ended, spending did not come back down to pre-war levels. This is the ratchet effect of federal outlays: they just keep increasing.
Publicly held debt grew from $3.6 billion in 1916 to $22.3 billion in 1923, which is a 519 percent increase...
Coolidge put Washington on a diet and deficits disappeared. Coolidge reduced federal debt by a third, notes Mr. Beach. But it wasn’t just about starving the Beltway beast. In a separate piece for the Coolidge Review, John Cochrane explains the beautiful, peaceful revolution that only occurred because Washington did not interfere:
At the beginning of the 1920s, about 30 percent of American homes had electricity. By the end of the decade, nearly 70 percent had been electrified...
Electricity improved during that time, too, as alternating current, or AC, became standardized. With that came electric lights instead of kerosene lamps, and electric appliances such as the iron, the toaster, the washing machine, and the vacuum cleaner. Electricity revolutionized home life, removing much of the drudgery.
Electricity changed the economy as well. In 1914, only 30 percent of manufacturing was electrified; by 1929, that number had reached 70 percent.
How did electricity get to homes and factories? Was there a big federal program to build the massive infrastructure of power stations and wires needed? No, private utilities built it.
In 1920, 20 percent of people had automobiles; by 1929, 60 percent of families owned cars. There were 9 vehicles for every 10 households. The automobile revolution happened in one decade...
The transportation revolution didn’t occur because the federal government offered tax breaks and subsidies. There was no federal spending bill to build the network of gas stations motorists needed. No, the filling stations came in on their own when people figured out that they could make money operating them...
Average earnings rose 30 percent in a decade. Gross domestic product (GDP) rose by a third... This great economic and lifestyle revolution for Americans of modest means happened with basically no guidance from the federal government. The government largely stayed out of the way. And the government did not try to regulate improvement in the name of “equity.” Is it terrible that rich people got to buy a Model T Ford in 1924 and poorer people waited until 1927 to buy one at half the price? Would we look back and wish the government had slowed it all down in the name of equity?
The successful Coolidge policy was the exact opposite of the Biden approach of identifying industries like electric vehicle makers and semiconductor manufacturers and showering them with taxpayer-funded benefits.
How do we move forward from here? Maybe we need to first consider the roaring success of a century ago.
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James Freeman is the co-author of “The Cost: Trump, China and American Revival” and also the co-author of “Borrowed Time: Two Centuries of Booms, Busts and Bailouts at Citi.”
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