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Bad Stimulus: Government Payments to Individuals Are a Terrible Way to Solve America’s Structural Economic Problems

President Joe Biden gets briefed by Liz Sherwood Randall, Julie Rodriguez and participates in a conference phone call with governors affected by the snow storm in the middle of the country in the Oval Office, Feb. 16, 2021, in Washington. (Official White House Photo by Lawrence Jackson)

Biden’s $1.9 trillion relief package is necessary for a rapid recovery for all, but it’s only a first step toward attaining broader economic security.

The new Democratic administration is poised to make its first proud step in delivering on its electoral promise to build back (America) better: the successful adoption of a $1.9 trillion stimulus package, the main components of which are a third round of stimulus checks, a renewal of federal unemployment benefits, and a boost to the child tax credit, as well as funding for school reopenings and vaccinations. It will probably not include a federal minimum wage hike.

Biden’s stimulus is not the stuff of economic revolution—it’s a mix of common sense and keeping the lights on. And the fundamental thinking behind the stimulus approach reflects a continuation of neoliberal policies of the past 40 years; instead of advancing broader social programs that could uplift the population, the solutions are predicated on improving individual purchasing power and family circumstances. Such a vision of society as a collection of enterprising individuals is a hallmark of the neoliberal policy formula—which, as the stimulus bill is about to make clear, is still prevalent within the Democratic and the Republican parties. This attention to individual purchasing power promises to be the basis for bipartisan agreement over the next four years.

The reality is that social programs on health care and education, and a new era of labor and banking regulation, would put the wider society on sounder feet than a check for $1,400.

There are very few federally elected officials who behave as though they understand that economic insecurity can breed political instability and governing paralysis. Globalization, deindustrialization, the contraction of the public sector, and the rise of contract labor via the gig economy have made individuals feel insecure in their private circumstances. This has contributed to the appeal of populist politicians, whose tenures generally are corrosive to liberal democracies. Moreover, these tendencies have together undermined our social contract as a whole, depriving governments of the means and resources to tend to the public interest.

Missing from the frame of thinking that dominates the stimulus debate, therefore, is something essential—the commons, a robust public sector of goods (e.g., energy) and services (e.g., health care) that makes societies resilient to crises such as the COVID-19 pandemic and weather-incurred power shortages. Ironically, it is this very deficiency—achieved through decades of cuts to public spending and privatization of public assets—that transformed the COVID-19 epidemic into a public health care disaster (and likewise turned Texas into the equivalent of a broken-down banana republic during the worst of its power grid shutdowns, brought about by decades of adherence to market fundamentalism in regard to public infrastructure goals).

These have been occurring against the backdrop of economic lockdowns that were implemented to prevent the spread of a pandemic and an even greater public health disaster. A veritable Sophie’s choice was imposed because of insufficient hospital capacity and a chronic deficiency of basic protective gear for medical personnel and medical equipment to care for the gravely ill—in other words, more market fundamentalism that eviscerated a robust public health infrastructure. Increasing the number of hospital beds is a worthy objective, but in many instances, this will simply restore cuts to previous programs that were attacked by a private health insurance/pharmaceutical industry complex that prioritized profits and returns on equity over public health considerations.

It is no replacement for the bold social experimentation that would truly address the flaw in capitalist democracies that have dominated the 21st century. If the Biden administration is serious in its ambition to build back better, it must adopt a broader proactive policy approach on these issues, rather than keeping American society on life support through a trickle of stimulus packages that tackle the symptoms, as opposed to the underlying disease.

This article was produced by Economy for All, a project of the Independent Media Institute.

Albena Azmanova and Marshall Auerback

Albena Azmanova is an associate professor of politics at the University of Kent’s Brussels School of International Studies and author of Capitalism on Edge: How Fighting Precarity Can Achieve Radical Change Without Crisis or Utopia (2020). Marshall Auerback is a researcher at the Levy Economics Institute of Bard College, a fellow of Economists for Peace and Security, and a regular contributor to Economy for All, a project of the Independent Media Institute.

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1 Comment

  1. James Charles March 23, 2021

    Usually the ‘economists’ who use ‘macroeconomic models’ ‘believe’ that the solution to the current macroeconomic problem is the implementation of the ‘correct’ type of demand side policies. That is, how to increase income/output {‘growth’}.
    Increase M0, M2 or M3, cut r, or make it negative. Increase G and finance it by ‘borrowing’ from the central bank or by borrowing from the private sector. Or ensure that private credit is extended only for GDP transactions.
    All that is lacking is a ‘sufficient’ increase in effective demand!
    The neoclassical/Austrian economists, who believe that income/output is ‘supply determined’, will argue that all that is required to generate a large increase the growth of the underlying productive potential of an economy is for taxes to be cut and more ‘competition’, etc be introduced!

    Aside from the negative externalities of ‘growth’, what they ignore is the ‘energy supply side’?

    ‘We’ have ten years?

    “ . . . our best estimate is that the net energy
    33:33 per barrel available for the global
    33:36 economy was about eight percent
    33:38 and that in over the next few years it
    33:42 will go down to zero percent
    33:44 uh best estimate at the moment is that
    33:46 actually the
    33:47 per average barrel of sweet crude
    33:51 uh we had the zero percent around 2022
    33:56 but there are ways and means of
    33:58 extending that so to be on the safe side
    34:00 here on our diagram
    34:02 we say that zero percent is definitely
    34:05 around 2030 . . .
    34:43 need net energy from oil and [if] it goes
    34:46 down to zero
    34:48 uh well we have collapsed not just
    34:50 collapse of the oil industry
    34:52 we have collapsed globally of the global
    34:54 industrial civilization this is what we
    34:56 are looking at at the moment . . . “



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