Basic Economics
Last month the Congress approved, and President Biden signed a $1.9 trillion economic stimulus plan. Now the president is presenting a $2 trillion economic package meant to boost the economy, reduce carbon emission and narrow economic inequality. By focusing on infrastructure, this plan will mobilize union and non-union trade workers to upgrade buildings, bridges and roadways. It will also ramp up the development of charging stations for electric cars and provide consumer tax incentives to purchase electric vehicles. There has been much talk among the political commentators about the strain these two bills will put on the economy.
However, I see it differently. The tax cuts passed by the previous administration were a drain on the treasury, as they did little to grow the economy. More well-off people, especially people at the highest economic levels, do little with such unexpected windfalls. The money goes into banking or investment accounts where, at best, it increases the total wealth of the individual.
On the other hand, money given to people at the lowest economic levels is almost instantly put into circulation. Poorer folks use that sort of windfall to buy groceries, pay bills and, perhaps, set a little aside for savings. Money spent on groceries helps support the store and pay its employees who in turn spend their wages on necessities such as food, clothing, rent and the like. Like ripples on a pond that money spreads out past the stores to the delivery people, to the farmers and their workers, the companies producing seeds and fertilizer and equipment.
I’m sure somewhere there’s a study, but we know a dollar spent on the kind of infrastructure projects Biden is proposing helps communities. Architects and planners, then construction people are hired and paid. They spent their wages in their communities for food and rent, at the movies and in the bars, for education and recreation. That money is spent again and again and again. Then finally a portion of each person’s and each company’s earnings is sent to the local, state and federal government as taxes.
In addition, everywhere people are working for a living wage means fewer people needing help from our social safety net systems. Government spending to build things, lowers government spending on welfare and policing, prisons and food banks.
Trickle down economic doesn’t work, but giving money to people who spend it both wisely and foolishly expands the economy. If the funds Biden is requesting are authorized, over the next several years many, many people’s lives will improve.
The rich and well off won’t really notice if they have to pay higher taxes out of their wealth. But a middle and lower classes will see their lives improved in both obvious and subtle ways.
Why would we oppose that?
Tell us what you think in the comments.
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