Thursday, April 22, 2021

Small Doubts Creeping in About the Strength of the Recovery

Click here to read the original Cautious Optimism Facebook post with comments

The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff has studied the behavior of American boom-bust business cycles going back over 200 years, and history has informed him that the forces of free markets spontaneously adjusting to and from recessions are stronger than people give them credit for. Markets recovering from slumps are resilient to all but the most destructive government interventions, the worst of those being the tax, regulatory, wage, monetary and trade policy disasters imposed on America by and during the Herbert Hoover and FDR administrations of the 1930's Great Depression.

Thus the Correspondent has been hesitant to jump on the gloom-and-doom bandwagon that Joe Biden is going to destroy the economy, since the market forces reignited by reopening what was effectively the Trump economy are going to be very difficult to stop. 

As evidence, Barack Obama launched a full-fledged assault on markets when he inflated government spending by quantum leaps, borrowed and wasted trillions of dollars on green energy duds, wasteful "stimulus" projects, and expanded unemployment benefits, ballooned the federal registry with thousands of new job-killing regulations including Obamacare, raised taxes on the rich, and rhetorically assaulted businesses and wealthy Americans on a daily basis.

Yet the economy still managed to recover from the 2008 financial crisis albeit at the slowest rate in U.S. history after a financial crisis when measured in terms of GDP.

But lately the Economics Correspondent is having second thoughts about 2021 and 2022.

Yes, the recovery will be very strong, but the destructive forces of economic interference already passed or proposed by President Biden are getting stronger too. 

In less than three months Biden has borrowed $1.9 trillion to spend over half that amount on payoffs/handouts unrelated to Covid relief, proposed spending another $2.3 trillion on anything other than infrastructure (and calling it infrastructure) with major tax hikes to fund it, shut down a great deal of U.S, domestic energy production, killed the Keystone pipeline, plowed more subsidies into Obamacare regulations that only generate more healthcare inflation, proposed a $15 minimum wage that will cost low-skilled employees work hours or even jobs, incrementally "forgiven" more and more student debt to be paid for with even more taxes, proposed raising the corporate tax and cartelizing all OECD nations to collude in a price-fixing tax campaign, and called for America to hobble itself by carrying the disproportionate burden of Paris Accord climate change regulations while letting China and India off the hook.

Add today's report that Biden is contemplating doubling the capital gains tax rate on high-earners to 43.8%, a move that would lead to mass selling of stocks and other assets to beat the scheduled tax-increase deadline and a significant lowering of appetite for investment risk, and the Correspondent is losing confidence that the recovery will be so strong after all.

Read article of the capital gains tax proposal at:

It's not a fait accompli that the recovery will falter just yet, but by launching his anti-markets blitzkrieg Biden is doing his damnedest to make it interesting.

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