José Manuel Suárez Mier*
President Joe Biden plans to spend, in addition to budgeted spending of $ 5 trillion, $ 6 trillion: $ 1.9 trillion in aid to neutralize the effects of the pandemic; 2.3 billion for very broadly defined infrastructure; and 1.8 trillion in new welfare handouts.
This colossal burst of government spending is mounted on a budget already out of control, with a fiscal deficit of 3.7 trillion, 19% of GDP in the last year of Trump, who prostituted the Republican party by crossing out its founding principles: government of moderate size and balanced public finance.
After the Trumpian health and economic debacle and with Republicans deprived of all moral authority on economic matters, it has become fashionable to lavish praise on the supposed virtues of a huge state and rosy evocations of Franklin D. Roosevelt’s (FDR) New Deal and the Great Society of Lyndon B. Johnson (LBJ), bypassing their terrible blemishes.
FDR (1932-44) never had a coherent economic plan and improvised with fickle occurrences. In his first campaign in 1931, he promised to balance the budget, only to do the opposite as president. Growth and jobs began to pick up when the US entered World War II.
What FDR was clear about was his grand political strategy, which consisted of using government spending to forge ties with new voters to broaden his base of political support and remain in power, which he did upon being reelected three times, something never seen before.
LBJ, a disciple of FDR, decided to undertake his great social engineering program, which he called the Great Society, which, through enormous public spending, sought to solve the deficiencies in education, medical care, urban conflicts, rural poverty, and communications and transportation.
The problem was that LBJ also decided to continue with the Vietnam War that it inherited from its predecessors, with a huge expansion of the US participation in that conflict, which entailed a formidable expense, which added to its ambitious welfare plan generated huge public deficits.
The seeds of great inflation were sown with economic stagnation that led years later to the thorough revision of the “progressive” policies, which without solving the problems they sought to address, bankrupted the treasury and generated skepticism about the virtues of state intervention.
The accession to power of Ronald Reagan in the US and Margaret Thatcher in the UK marked a break with the government’s gradual invasion of the economy, and with the collapse of the Soviet Union, which revealed the aftermath of misery and ruin it left behind, the romantic vision of socialism was buried.
These lessons were forgotten. Today, progressives celebrate with relish that Joe Biden, chosen for his moderation, acts as if he were a member of the band of fanatics who proudly flaunt themselves as socialists.
I’m afraid this is all going to end very badly …
*Consultant in economics and strategy in Washington DC and professor at universities in Mexico and the US. Email: aquelarre.economico@gmail.com
This column is also published in Spanish on May 6, 2021, in the Excélsior newspaper, based in México City.