As we walked, blinking, into the sunlight, after a year in the darkness of a lockdown, our wallets seemed to open all on their own. People rushed into restaurants, bars, and retail stores. They rushed to buy a car to get to those places, sending prices skyward. Due to a lingering and generous unemployment boost, people did not rush back to work. In fact, we have a plethora of policies from several different government agencies. As the economy recovers, the need for some of these has evaporated and, in fact, they become detrimental to our economic health.
Perhaps most glaringly, the CDC just extended the federal moratorium on evictions. That moratorium was redundant when it was created, but, at this point, it is a terrible blunder. Many of the people who are taking advantage of this policy are simply living rent-free because they can’t be evicted. It’s a punishment for landlords who often struggle to get paid through the government programs preventing eviction. It makes it nigh on impossible to evict even the most difficult of tenants. Horror stories abound of destructive behavior or tenants making their neighbors’ lives difficult. The CDC, for what it’s worth, has no business interfering in the housing market. If we want to guarantee housing for people on the brink of homelessness, there are far better ways of doing it as well.
Another bizarre decision was the Biden Administration’s move to extend student loan forbearance. The pandemic has affected different people in different ways, but most workers in white-collar jobs have been able to simply work from home. Most holders of college degrees – and student loans – work white-collar jobs. This means we are subsidizing those who are largely unaffected by the pandemic with a pandemic response policy. It simply does not make sense.
The delta variant of COVID will likely create problems for our healthcare system due to the large unvaccinated population, but, despite fears of a retraction to a pandemic economy, does not appear to be impacting the economy. Data remains strong and inflation, while lower than the previous measure, sits at a robust 5.4%. With that in mind, the stimulus deal that just passed the Senate becomes less pressing. Still, the impact on the budget deficit is relatively minor (see below) and much of our physical infrastructure is desperately in need of an update. However, the additional spending called for by House Speaker Pelosi (D-California) et al would be exceptionally poorly timed. A large deal may make sense as an automatic measure if economic measures hit a certain level, but the economy is already running hot, and spending all our resources on pumping up a hot economy is irresponsible at best.
Some modifications to our welfare system are long overdue, but the ways in which the Biden Administration has gone about expanding the social safety net have been haphazard and have not utilized the power of markets at all. Subsidies are much less effective than cash and an eviction moratorium taxes property owners to pay delinquent renters a housing subsidy. Targeting those most in need, also important, has seemingly been completely neglected. We are at a critical juncture, so errors made now are magnified in their importance. President Biden needs to do better if he actually wants to ‘Build Back Better.’