Big Government Returns With A Vengeance
The coronavirus pandemic has led to the return of big government fetishism.
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In just one week, here is what the Eccles Building has done:
Statism has made its return, and it is uglier than ever before. A cash-strapped Washington is writing checks to millions of Americans, the Federal Reserve is printing trillions of dollars to pump into the system, and leftist politicians are demanding the installation of a filing cabinet full of progressive goodies. President Donald Trump, not exactly a staunch libertarian, has flirted with quasi-state ownership of corporations. How did the U.S. go from making fun of Joe Biden’s gaffes and getting prepared for the 2020 baseball season to sinking deeper into debt and fighting a virus? Well, thanks to the unsanitary conditions of a wet market in China, Americans are now facing the possibility of a deeper Swamp – in perpetuity. Big government is back with a vengeance.
Big Government Fetishism
A standard, non-ironic theme you will find in political commentary from newspapers, on cable news, and across social media is that libertarian dominance over public policy is diminishing and that the era of small government is coming to an end. The ideologues have taken over the asylum during the Wuhan Coronavirus pandemic, shrieking nonsensical polemics about the iniquities of fiscal conservativism and peddling statist panaceas that will ostensibly be the eternal cures to our economic and health woes.
Rahm Emanuel
The left is exploiting the current crisis to promote universal health care and a guaranteed basic income, while the right is using COVID-19 to show how President Trump is the man in charge because he is throwing money at the problem. Both sides are heeding the advice of Rahm Emanuel, who famously emphasized several years ago the importance of never letting a crisis go to waste.
In addition to spending money the government does not have, the White House is pondering the idea of attaining federal equity stakes in some of the biggest companies in the country. Upon hearing such egregious concepts, you cannot help but think of the age-old economic principle: the ratchet effect. This is when prices increase due to temporary pressures but then fail to decrease when those pressures subside.
In politics, the state adopts an expanded role throughout a crisis, and the Swamp maintains that expanded role once the nation recovers. Perhaps the public is at fault, too, for enabling the government when everyone else is desperate for some sort of lifeline in these difficult times.
Now that Americans are getting around $1,000 in free money, they are receiving a first-hand look at how a universal basic income (UBI) would function. After a couple of months of crack, people will become addicted to the supply and declare that free money is a human right. A considerable percentage of the population will soon demand their lawmakers institute a UBI, putting even more strain on a public purse that is profusely bleeding red ink every day.
Trumped Up Stimulus
After returning to a trillion-dollar budget deficit and adding to the swelling $23 trillion national debt, the federal government is again spending an astronomical sum of money that it does not have. Some experts are going as far as claiming that the White House’s $1.2 trillion plan fails to go far enough.
So far, Washington has put forward a couple of relief packages. The first addresses funding for vaccines and for states fighting the Wuhan Coronavirus outbreak. The second includes direct payments to individuals, payroll tax cuts, credit facilities for larger companies, small business lending, and student loan assistance.
A separate relief package for the private sector is being discussed. A whole host of businesses and industries are petitioning the government to bail out companies that have been impacted by COVID-19. Right now, the travel and tourism sector is requesting $150 billion, the airline industry is asking for $50 billion, and Boeing alone is seeking $60 billion.
Every proposal will likely receive bipartisan support, though there will inevitably be some election-year theatrics. The main sticking points on both sides is that they do not want corporate buybacks and executive bonuses. Yet, only one person has shown any concern over the fiscal side of these plans: Senator Rand Paul (R-KY).
The senator, who does not oppose spending money to fight the Coronavirus, requested that lawmakers cut wasteful military spending and transfer those appropriated funds to the rescue bundle. Paul was scorned in the media, falsely portrayed as a villain who wanted Americans to get infected and die over libertarian principles. But is worrying about Uncle Sam’s pockets wrong in the middle of a national catastrophe?
Banking On Interventions
The Federal Reserve ostensibly leaped to the front of the battlefield by announcing trillions of dollars in aid in only a few days. The central bank is throwing everything but the kitchen sink at the financial crisis, exceeding its efforts during the 2008 economic collapse. All that is missing are bailouts of foreign banks.
In just one week, here is what the Eccles Building has done:- Cut interest rates to zero.
- Expanded its reverse repo operations by $2 trillion.
- Established U.S. dollar swap lines with nine central banks for a total of $90 billion.
- Launched the Money Market Mutual Fund Liquidity Facility (MMLF).
- Confirmed buying Treasurys with short- and long-term maturities.
And the Fed has said that it is prepared to do more if needed. The central bank might be required to fire more bullets considering the U.S. stock market failed to soar to the moon in response to these policy prescriptions. As Jeff Deist, president of the Mises Institute, recently stated in an RT interview, “I’m not sure more of a narcotic does much for the patient at this point.” After years of interventions and distortions, the only thing the Fed is ensuring is that Uncle Sam will suffer a future overdose.
Are subzero rates next? Maybe negative rates are the next round of ammunition the Fed is saving should the U.S. economy fail to recover, equities continue to bleed, and COVID-19 refuse to leave.
Trust The Government?
Liberty Nation’s Leesa K. Donner recently asked: “Are we jumping off a cliff without enough reason?” Her article examined the medical response to the situation, but the question could also apply to America’s pecuniary plight during market meltdowns and public panics. A lot of people are looking to Washington and their statehouses to shield them from the health crisis, despite the government possessing a dismal record on such matters. The Swamp is a one-trick pony that reveals its odious nature anytime there is an opportunity to expand its power and largesse. COVID-19 is too severe to be left to the politicians – the free market is doing a far better job reacting to the outbreak anyway.
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