By Steve Levy
It sure is fun watching Republicans who bashed Joe Biden for spending like a drunken sailor, thereby leading to huge inflation and the affordability crisis we presently live under, jumping through hoops to support President Trump’s off-the-cuff proposal to give each American adult $5,000.
How cute that Trump added that the check only comes if the Republicans win the midterms. He claims he may have the authority to issue an executive order to effectuate the gift. He obviously does not. But let’s say he did. If he has the authority to do it, why didn’t he do it already and why should it be dependent on whether or not the Republicans win the midterms?
Moreover, Republicans control both houses at the moment and they could make this happen through reconciliation, which only requires 50 votes in the Senate.
That’s why this promise smells far worse than the typical promise bandied about by politicians who say, “Vote for me and I’ll give you a chicken and every pot.”
It is equally appalling to see how Democrats — who voted and cheered for Biden‘s Build Back Better and so-called Inflation Reduction Act that spent trillions during his administration (thereby sparking 20% inflation) — suddenly get religion on fiscal responsibility and declare the Trump proposal to be awful policy.
If only we could have some people out there who can call balls and strikes and not be cheering for one team or the other.
We weren’t being partisan years ago when we warned that Biden‘s uncontrolled spending was going to lead to huge spikes in inflation and interest rates, creating an affordability crisis. It was his own Democratic economists such as Larry Summers and Steve Ratner who warned about the same thing.
And if we don’t want to be disingenuous,we must call out the same fiscal stupidity when we see it proposed by Republicans
The proposal runs into a myriad of problems. As noted above, how does Trump explain that this will only go into effect if Republicans win the midterms when they already control both chambers of Congress?
Equally significant is the fact that it will erode the Republicans’ legitimate claim that this unaffordability crisis was caused by the Democrats when they controlled the government from 2021 to 2025 by spending at historically high, irresponsible levels.
If just handing out money indiscriminately would make everyone richer, why would we stop at $5,000 a household? Why not make it $5 million? Everyone would be rich and can own a house in the Hamptons. But we know that, while more money would go into your pocket on day one, within a few months, the whole economy would collapse because the money is not paid for.
And the value of your $5,000 would shrink to five dollars.
In fact, wouldn’t we all want to go back to the pre-Biden days before the big spending spree, when we had a thriving economy under Trump‘s first administration in 2019?
An indiscriminate giveaway of $5,000 to every American is different from cutting the tax rates on those who earn income.
Those types of tax cuts do indeed spur the economy, as was evidenced every time a tax cut has been implemented, whether it was by Kennedy in the 60s, Reagan in the 80s, or Trump in 2017.
Cutting money on earned income incentivizes people to work harder and to reinvest their savings into the economy. Indiscriminately giving people cash, not tied to work, encourages them to sit on the couch. It doesn’t produce any wealth; it just creates a sugar high, which leads to more inflation.
If the president had said, “I’m going to work with Congress to fashion a bill that will further cut income tax rates and capital gains,” that’s a legitimate argument to be had. We could talk about indexing capital gains to inflation and raising the exemption on capital gains on home sales up to $1 million.
Those are worthy debates. But this $5,000 giveaway is not only unseemly, it’s awful policy that will spark further inflation.