“Some of the causes are fairly self-evident: Entering the third year of the Covid-19 pandemic, the US — and much of the rest of the world — is grappling with a supply chain crisis. That means most goods, from game consoles to oranges, are more difficult to get to store shelves for one reason or another, whether it’s a lack of critical tech components or a backup at ports due to labor shortages. But US consumers simply haven’t stopped buying, and that demand-supply disjunction has caused record inflation.
Some economists, as well as President Joe Biden, take the view that the pandemic — and the pandemic-snarled supply chain — are the primary culprits, and inflation will ease as the US keeps combating the pandemic and implements supply-chain fixes. On Friday, according to CNN’s Kaitlan Collins, Biden told reporters that “the reason for inflation is that we have a supply chain problem that is really severe.”
Others, though, are concerned the problem is bigger than that. Former Treasury Secretary Larry Summers, for example, has also pointed to government spending as a reason for increased inflation, and believes it’s far from a bump in the road.”
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“lockdowns and being stuck at home — unable to travel or go to restaurants, bars, and live events — have shifted what Americans are spending their money on. Less money spent on travel or experiences, combined with stimulus funds, has driven many Americans to buy more consumer goods. That, combined with supply chain problems decades in the making and exacerbated by the pandemic, has led to the current, precipitous rise in inflation.”
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“While the US has spent trillions in pandemic relief, however, inflation is also occurring elsewhere in the world, where governments have taken different approaches to dealing with the fallout from the pandemic — suggesting that government spending doesn’t tell the whole story.”
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“While the Biden administration is doing what it can to fix supply chain issues and drive down rising gas prices, most of the tools to address inflation are in the hands of the Federal Reserve.”
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“One way the Fed plans to cool the economy is “tapering” — gradually decreasing the $120 billion it spends per month on government-backed bonds, which has injected money into the financial markets during the pandemic. In November, Fed Chair Jerome Powell announced the central bank would reduce that amount by $15 billion each month. The purchasing program is supposed to end halfway through 2022, but as the New York Times reported in early December, it could finish more quickly as the Fed attempts to reduce inflation.
“At this point, the economy is very strong, and inflationary pressures are high,” Powell said in late November. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
Along with that could also come interest rate hikes, although the Fed has not announced specific plans to do so.”
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“Beyond monetary policy, though, the other massive piece of the puzzle is the supply chain — and that’s something politicians and policymakers have much less control over. Biden has attempted to ease supply chain woes by running the Port of Los Angeles 24 hours a day, clearing the docks so goods don’t wait for days on cargo ships stranded in the water. And the release of 50 million barrels of oil from the US Strategic Petroleum Reserve last month was geared toward reducing gas prices, which have already begun to fall.
Most likely, however, the supply chain will remain snarled for the foreseeable future — keeping inflation higher than we’re used to — and policymakers will have to react to that reality.”
“While Puerto Rico has failed to make debt service payments since 2017, government spending is up over 12 percent since then despite a drastic population decrease. Long says Puerto Rican officials are realizing “how easy it is to hide financial data, pretend austerity, and fool their creditors.” For its part, she adds, the U.S. government is creating all the incentives for Puerto Rico “to become a serial defaulter, like Argentina,” a country on the brink of its tenth default since 1816.
The comparison is ominous; Argentina’s longstanding practice of acquiring heaps of debt on the global markets before failing to repay it reflects the workings of its internal politics. As scholars Pablo Spiller (of the University of California, Berkeley) and Mariano Tomassi (of the Universidad San Andrés in Argentina) wrote in 2007, Argentina’s brand of federalism combines decentralized spending for the provinces with largely centralized tax collection and funding schemes. The system, which began to arise in the late 19th century, still motivates “subnational governments [to] adopt a lax fiscal stance in the expectation that they will be bailed out in the event of a fiscal crisis.”
In turn, they write, the top regional politicians tend to be the crony machine operators “who are best at the game of extracting rents from the common central pool.” Similarly, negotiating rescue packages with the International Monetary Fund has become a part of an Argentine president’s unofficial job description. Will governors of Puerto Rico assume the same role vis-à-vis the White House and Congress?
Certainly, U.S. taxpayers should consider the long-term consequences of their bailout of Puerto Rico, where children of politicians tend to be overrepresented as recipients of six-figure government salaries and seven-figure government contracts. The habitual debt busts of Buenos Aires is one Latin American export that is better left on the dock.”
“Earlier this year, schools around the country received more than a hundred billion dollars from the federal government—American taxpayers, in truth—in order to recover from the pandemic and finally get back to the task of teaching kids.
The feds stipulated that 20 percent of that money be put toward addressing learning losses during the pandemic, but the bulk of it can be spent at schools’ discretion. Which means, of course, that many schools are using this sudden injection of cash to make improvements that have nothing to do with keeping COVID-19 at bay.
“Some districts are investing big money in initiatives that don’t appear at first glance strictly COVID-related,” notes Education Week. “Miami-Dade schools plan to spend $30 million, or $86 per student, on cybersecurity. Raleigh County schools in West Virginia lists a $9 million effort—more than $800 per student—to expand an elementary school, adding nine classrooms, upgrading the library, expanding the kitchen, and separating the cafeteria and the gym. The Newport News school district in Virginia is spending $840,000 for a new student information system to help teachers catalog students’ academic progress.”
An unnamed school district will use some of its COVID-19 relief funds to install vape detection devices, purchase new student ID cards, and build a tennis court.
Indeed, many districts seem to be spending significant chunks of money on upgrading athletic facilities and expanding stadiums, according to Education Week. Athletics can be an important part of many students’ lives, and letting kids get back to sports was a good reason (among many) to move away from the soul-crushing farce of virtual learning and get everybody back in school. But a slightly nicer football field probably isn’t going to improve students’ test scores or make them safer from COVID-19, which after all are the two primary justifications for all the spending.”
“The money for the program was included in the American Rescue Plan—passed back in March—a massive $1.9 trillion spending bill that was sold as a COVID-19 response but contained very little that had to do with the epidemic. The bill set aside $4 billion for use for drug addiction programs and mental health treatment.”
“The Florida governor..unveiled a $99.7 billion proposed spending plan that comes as DeSantis gears up for his 2022 reelection and continues to generate buzz as a top-tier potential 2024 White House hopeful. The governor’s budget is packed with federal stimulus funds from the Biden administration that DeSantis wants to use for his most politically popular programs, including a gas tax break and $1,000 bonuses for police and teachers.
The governor made it clear..that he wants to use $3.5 billion from Biden’s American Rescue Plan to help fund nearly every high-profile piece of his budget, setting up a scenario where the Biden administration could pay for policies DeSantis will use to campaign on during his reelection bid.
“I think the most ironic piece about his budget is that the governor wants to take $1.2 billion in American Rescue Plan money and use that for the gas tax break,” state Rep. Anna Eskamani (D-Orlando) told reporters after the budget announcement. “As the governor continually attacks President Biden, the reality is we could not balance this budget, or give out tax breaks without President Joe Biden.””
“the U.S. Department of Labor has denied California $12 billion in transit funding, including grants from the recently signed infrastructure bill. The reason? A 1964 federal law requires the labor department to certify that the state agencies seeking any mass-transit grants are “protecting the interests of any affected employees,” The Fresno Bee reported.
So, the Biden administration is claiming that California—the state that provides its public employees with unparalleled pay and pension benefits, and provides collective-bargaining rights unheard of anywhere else—is being mean to its “affected” public employees because the state passed a 2013 law, authored by Democrats, that infinitesimally reined in pension benefits.
As SFist summarized, “Biden is withholding giant amounts of federal money from California public transit because the state’s public-employee pension system is apparently not paying people enough.””
“”The Build Back Better Act relies on a number of arbitrary sunsets and expirations to lower the official cost of the bill,” explains the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for balanced budgets. The group’s newly updated analysis of the Build Back Better plan finds that the package will cost an estimated $4.8 trillion over 10 years if all provisions are made permanent—double the price tag applied by the CBO last month.”
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“several key parts of the bill are designed to game the CBO’s method for scoring the cost of legislation by setting arbitrary expiration dates even though lawmakers obviously intend for those policies to be permanent fixtures. Probably the best example is the expanded child tax credit, which would expire after just a single year. Other parts of the bill, including the universal pre-K funding and new subsidies for child care, would expire after six years. Expanded subsidies through the Affordable Care Act would last until 2025.
With all those gimmicks in place, the CBO assessment of the bill projects that it will cost about $1.8 trillion and add about $367 billion to the deficit over the next decade.
If all the Build Back Better plan’s proposals were made permanent, however, the final price tag would be $4.8 trillion, and the bill would add about $2.8 trillion to the deficit, according to the CRFB.
“To be sure, lawmakers may choose not to extend some or all of these provisions,” the CRFB analysis states. “However, if they do, they would need to more than double current offsets in order for the bill and the extensions to be paid for. The alternative would be a substantial increase in the debt.””
“The $1 trillion infrastructure bill that President Joe Biden signed into law..dumps a lot of new money into existing highway programs to be spent by state departments of transportation (DOTs).
The price tag of the bill—which includes $550 billion in new spending, $110 billion of which is earmarked for highways and bridges”
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“by mostly topping off existing programs, it will largely maintain a status quo where some states deploy their highway dollars effectively, while others continue to set them on fire in the hopes that that will produce better roads.”
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“That would include places like New Jersey, which ranked last in a report on state highway performance released by the Reason Foundation today.
The Garden State, per the report, spent $1,136,255 per mile of state-controlled road in 2019 while also having some of the worst urban congestion and pavement conditions in the country.
That’s well above more cost-effective states like Virginia. It managed to spend only $34,969 per mile of state-controlled roads while also having above average pavement quality and slightly worse-than-average congestion. (Virginia ranked second overall in the Reason highway report, right behind North Dakota.)”
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“Feigenbaum says part of New Jersey’s high expenditures can be chalked up to the high design quality of its highways, which have generally wider lanes and straighter curves in order to improve safety. (It ranks fourth in the Reason report in terms of overall fatality rate). But he also says a lot can also be explained by a cronyist state DOT that’s dominated by political appointees.
A state like Virginia has been able to keep up road quality while keeping overall road spending in line by having a more professionally run DOT, he says. It also makes heavy use of public-private partnerships, whereby private companies put in their own capital to rebuild or expand highways in return for being able to charge tolls on the lanes that they build, says Feigenbaum.
In keeping with its “spend more on the same old programs” nature, Biden’s new infrastructure bill does remarkably little to advance public-private partnerships or expand the interstate tolling that supports them.
The infrastructure bill does increase the amount of private activity bonds (tax-exempt bonds issued by a private company to fund an infrastructure project) that can be issued from $15 billion to $30 billion. It also reauthorizes a handful of limited programs that allow states to use tolls to reduce congestion or rebuild bridges. But it leaves in place a general prohibition on tolling interstate highways.
The overall trend in highway spending over the past decade has been higher spending and marginally improved roadway quality, says Feigenbaum, with some states standing out for either their innovations or their wastefulness.
The new infrastructure bill will likely produce more of the same.”
“About $550 billion of the $1.2 trillion law is new spending, which will be spread out over five years. The remaining $650 billion in the bill would have been allocated for existing transportation and highway programs under previously planned funding.
The new money in the bill will go toward a wide range of projects, including road repairs, high-speed internet services, and investments in electric buses. Notably, the infrastructure bill was backed by both Democratic lawmakers and some Republicans, and was the culmination of years long attempts to advance infrastructure legislation that’s spanned presidential administrations.
While it’s a landmark investment, the legislation only authorizes a fraction of the funding required to tackle the entirety of the US’s infrastructural challenges. Across specific categories of the bill, including lead water pipe replacement and broadband, it’s likely to take much more than what’s already been allocated to fully solve issues of access, safety, and equity. The bill includes $15 billion specifically for addressing lead pipes, for instance, while experts believe it will take $60 billion to actually replace every lead pipe in America.
Still, the passage of this bill — which contains critical funding that the country has needed for decades — is significant, and an important down payment for future investments.”
“The bill, H.R. 3684 (117), is historic in its scope with $550 billion in new money funneled into hard infrastructure, from overhauling bridges to supercharging Amtrak’s most popular rail corridor in the Northeast. But it falls far short of Biden’s original vision, which promised to dramatically reduce the climate impacts of transportation, the single largest source of pollution. In the end, the final product was the victim of the bipartisan focus it took to get the bill done and is an example of the razor thin governing majority Democrats must navigate.”