is still claiming there’s an economic crisis to justify trillions of dollars in new federal spending. But it’s getting harder to make the case. On Thursday the Commerce Department reported that real gross domestic product increased at an annual rate of 4% in the fourth quarter of 2020. This follows the historic 33.4% surge in the third quarter and demonstrates a remarkable rebound from the spring shutdowns wherever state governors have been willing to allow it.
Nationwide, the last three months of 2020 featured a robust 13.8% increase in business investment, including a sizzling 24.9% surge in equipment purchases.
Overall, the solid 4% real GDP growth is a welcome and unfortunately rare event. The last two quarters were the first to reach or exceed such a pace during the Trump presidency. Of the 31 complete quarters during the Obama presidency, only four matched or exceeded this rate. The United States has just enjoyed the best final full quarter of a presidency since George H. W. Bush presided over a 4.2% surge in the final months of 1992.
By any reasonable measure, the economy is not in need of a “rescue.” So in a spirit of unity, how can sensible Democrats explain to President Joe Biden that his spending plans may be unnecessary, irrelevant to the issues at hand and dangerous for an economy in which federal debt now exceeds GDP?
On the first point, President
chairman of the White House Council of Economic Advisers
politely dropped a hint in these pages recently. Mr. Furman noted that the economy might not actually need every nickel of the tax dollars that Mr. Biden aims to spend:
Making federal relief contingent on economic conditions wouldn’t only help tailor aid to the pace of the recovery; it would be an essential step to building back better. New contingencies could be preserved as formulas to ensure that relief and economic support are automatically delivered whenever and wherever needed. These measures would also help ensure that assistance phases out when it’s no longer needed.
As for the issue of the Biden program’s relevance to the issues of the day and impact on the federal Treasury, another veteran of the Obama-Biden economic team feels compelled to acknowledge reality in the New York Times.
who oversaw the Obama bailouts of auto companies, writes now:
President Biden’s proposed $1.9 trillion Covid relief plan contains many commendable provisions, from money for speeding the vaccine rollout to aid for struggling states and cities.
That said, the measure, the American Rescue Plan, is also partly a legislative Trojan horse — an enormous aid package aimed at addressing needs that, in some cases, go well beyond the immediate challenges of Covid.
That’s generally OK by me; President Biden has wisely put helping all struggling Americans — whether their financial pain stems from the pandemic or not — at the top of his priority list.
But his administration can do so far more surgically, and with a nod toward our long-term fiscal challenges. We don’t necessarily need (at least not now) as much stimulus as he is offering. And some of the most expensive provisions are the least well targeted to help the neediest.
Whatever mistakes they made during the Obama years and however misguided their policy ideas may be now, Messrs. Furman and Rattner at least understand that this is not 2009 and the ability of the federal government to borrow is not infinite.
Does the President? During a Wednesday event at which Mr. Biden signed executive orders to assist renewable energy producers and inhibit traditional energy production, Mr. Biden recalled his experience as vice president and the massive interventions of 2009. Here’s an excerpt of Mr. Biden’s Wednesday remarks from the official White House transcript:
The Obama-Biden administration reduced the auto industry — rescued the auto industry and helped them retool. We need solar energy cost-competitive with traditional energy, weatherizing more — we made them cost-competitive, weatherizing more than a million homes.
The Recovery Act of our administration — the last admin- — our admin- — the Democratic administration made record clean energy investments: $90 billion. The President asked me to make sure how that money was spent, on everything from smart grid systems to clean energy manufacturing.
Now, the Biden-Harris administration is going to do it again and go beyond.
To the extent Mr. Biden’s meaning can be ascertained, this may sound more like a threat than a promise, and it certainly is for taxpayers and holders of Treasury bonds.
Politicians on the left and right will probably never agree on why the promised green-jobs boom of that era never materialized, and why the $800 billion Obama-Biden stimulus plan failed in its mission to prevent a sustained period of unemployment above 9%.
But regardless of their views on economics, certainly lawmakers can find common ground and agree that the economy is much healthier and jobs are much more plentiful than in January of 2009.
Mr. Freeman is the co-author of “The Cost: Trump, China and American Revival.”
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