Peter Morici: Biden’s progressive agenda will harden post-pandemic social divisions

Later this year, gross domestic product will recover to its pre-pandemic level. Scars will remain that exacerbate inequality and the social conditions that can instigate the kind of civil unrest that stained the country during the public-health crisis.

Some 10 million more Americans will be unemployed, underemployed or stuck in part-time work as a consequence of the structural changes instigated or accelerated by the crisis. As stimulus aid recedes, they will have no real prospect for accomplishing the basics for a decent life—reliable sources of income for rent and groceries.

Millions left behind

Nearly one-fifth of tenants are delinquent on rents. Bankers and bondholders are raising risk assessments on construction loans and the mortgages supporting rental properties, because as moratoriums expire, many tenants will face eviction, rents in hard impacted cities will plunge, and landlords will default.

Fifty million Americans—including 17 million children—risk hunger, and it’s hard to see how SNAP and food banks, especially as emergency aid expires, will adequately address all that.

Read “A Tale of Two Cities“—the French Revolution was instigated as much by hunger as by Enlightenment ideals. Economic frustrations, as much as the civil rights movement’s unpaid bills, fueled the riots, looting, burning and attacks on police that accompanied Black Lives Matters demonstrations last summer and the Proud Boys and others who stormed Capitol Hill on Jan. 6.

Political frustration can provoke both the militant left and right, but President Joe Biden is not governing as the moderate he advertised during the Democratic primaries and seeking accommodation with Republicans to address grievances on both sides. His first weeks in office were dedicated to a series of executive orders and policy announcements on economic relief, health care, racial equity, immigration and climate change and energy policy with a radical left bent.

Background reading: All of President Biden’s key executive orders—in one chart

Shutting down expansion of the Keystone XL pipeline and new drilling on federal lands will put thousands of Americans in construction, manufacturing and engineering out of work in the conservative leaning interior West. Those will do little to reduce fossil fuel use but will make America more dependent on less-secure foreign oil.

Progressive disguise

Biden’s proposed $1.9 trillion stimulus is too expensive, gives too little assistance to those permanently unemployed or accelerate growth. Instead, it provides progressive Democrats with cover to drive longer-term policy changes under the guise of emergency relief.

Breaking news: Biden expects stimulus payouts to begin yet this month, says bill passage speeds up vaccinations

Passed in whole, the federal deficit for 2021 would well exceed $3 trillion and leave limited fiscal head space for his growth initiatives, such as rebuilding infrastructure, without unleashing the Fed’s money printing press beyond any reasonable restraint.

The proposed stimulus package sets aside $422 billion for additional payments to households—many who neither lost jobs nor income. Seventy-one percent of the stimulus checks last spring went into savings or to retire debt, and repeating that mistake would do little to re-employ the 10 million displaced workers.

The package would also boost the child tax credit and distribute the money to families that owe no taxes. This is a down payment on a guaranteed annual income and serves a long-sought Democratic goal of rewarding low-income constituents, but it harms incentives to improve marketable skills to earn a living wage.

Political cover

According to the Congressional Budget Office, the proposed $15 an hour minimum wage would kill 1.4 million jobs. The mandate that private employers provide paid sick and family leave would only add to the carnage.

All that creates Republican opposition, risks locking up the Senate with its 60-vote rule, and provides political cover for Democrats to ram through a reconciliation bill with only 50 Democratic votes plus Vice President Kamala Harris.

All this will only inflame frustrations on the right—yet the conditions of minorities generally characterized as being on the left will not be adequately improved.

After the pandemic, the social conditions that gave rise to civil unrest in 2020 will remain but exacerbated. Another hiccup for the economy could then ignite the worst of last summer and January 6 again.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

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March 08, 2021 at 11:00PM
Peter Morici
http://www.marketwatch.com/news/story.asp?guid=%7B21005575-02D4-D4B5-4572-D2E9F46185F9%7D&siteid=rss&rss=1