The Long Sordid Tale of Government Waste

Biden’s signature legislation proposal, the Build Back Better Act, was designed as the most expensive spending package ever, at $3.5 trillion. (Saul Loeb/AFP via Getty Images)

Commentary

For the past year, Democrats in Congress have been trying to pass the president’s Build Back Better plan. As described by the administration, it’s the boldest investment in America since the New Deal.

It started with an insane $3.5 trillion price tag. The bill stalled thanks to Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.)—two Dems who seem to be tethered to reality. When that couldn’t get passed they reworked the bill down to just under $2 trillion. No joy on that either—so far.

Investment in America certainly sounds good. But does it actually do any good?

Decades of Unbridled Spending Failure

No government has ever solved a problem by throwing money at it—especially ours. Take housing subsidies. The government has been pouring money into housing initiatives, to the tune of untold-billions of dollars, for decades.

And yet the slimmed down version of the Build Back Better bill earmarked $34.7 billion for “activities and assistance for the HOME Investment Partnerships Program … as authorized under title II of the Cranston-Gonzalez National Affordable Housing Act”—which was originally passed in 1990.

It authorized $2.3 billion for the “Supportive Housing for the Elderly Program authorized under the Housing Act of 1959.”

And set aside $14.7 billion for “the project-based rental assistance program, as authorized under the United States Housing Act of 1937.”

If government spending could solve a problem, why would we still need to be funding programs passed in 1937?

Government spending just never goes away.

Today the progressive wing of the Democrat party seems completely obsessed with the idea of passing some kind of bill that spends an obscene amount of money on social programs.

The most recent versions of the bill earmark over half a trillion on subsidies related to climate change. It spends even more on subsidies for health care, universal prekindergarten programs, and child care.

And when you can’t argue the absolute numbers, it’s time to reframe the debate.

A Bold New Strategy: Redefine Social Spending

The way any issue is “framed” in Washington has always been key to getting popular support.

In the mid-1990s, when Democrats were trying to reduce the threshold that would qualify people to pay an estate tax, Republicans began referring to it as a “death tax.” Point GOP.

Now Treasury Secretary Janet Yellen has taken the lead where Build Back Better is concerned.

Speaking at the World Economic Forum’s recent virtual gathering, she re-dubbed Build Back Better as “Modernized Supply-Side Economics.”

As opposed to the traditional definition, which focused on tax cuts and deregulation, her version has to do with massive debt, deficit spending, and currency devaluation.

Yellen said, “Our new approach is far more promising than the old supply-side economics, which I see as having been a failed strategy for increasing growth.”

She continued, “Modern supply-side economics seeks to spur economic growth by both boosting labor supply and raising productivity, while reducing inequality and environmental damage.”

Just another name for more spending.

Has Anyone Asked Why?

Why do we need all the “investment in America” anyway? Why is it that average people can’t afford to lead reasonably normal lives anymore?

A recent survey by Bankrate.com showed that 56 percent of Americans wouldn’t be able to cover an unexpected $1,000 emergency expense out of their savings. Living month-to-month has become the standard of life in America these days.

All these investments are aimed at helping average everyday people pay for what years ago used to be affordable.

Of course, legislators in Washington would react in disbelief if you pointed out to them that the system of corporatist, crony-capitalism they’ve endorsed over the past decades is at the very root of the problem.

Creating a fiat currency by decoupling the dollar from gold in the 1970s led to an ongoing decline in the currency’s purchasing power, which was basically the same thing as inflation. Then they manipulated how they measure inflation to make it seem like it wasn’t really a problem.

Zero interest rates eliminated the average person’s ability to earn money on their savings while programs like quantitative easing, to bail out “too big to fail” financial institutions, further drove up prices—especially asset prices owned by the elite—all the while piling up debt to spend money they don’t have on programs they can’t afford that ultimately won’t make a bit of difference.

The economic situation of today didn’t happen overnight. And frankly, it shouldn’t have caught anyone by surprise. Anyone who was paying attention should have seen it coming.

I’m not holding my breath for anything to change in Washington, and investors who are serious about building a secure future shouldn’t either. Continued government spending, whether it’s $3 trillion or $1 trillion, is going to keep devaluing the currency you earn. Investors should look to protect that first, and sectors like materials, energy, and commodities will likely be the beneficiaries of higher prices. Big-name, boring stocks—companies like Exxon Mobil, ConocoPhillips, Freeport McMoRan, Nucor Corp., and Archer-Daniels-Midland—will likely continue to perform well.