HOW THE GOVERNMENT CAN SUPPORT THE ECONOMY AND WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Effective governments are critical components of our societal infrastructure. They are needed to combat public health threats such as the coronavirus, to keep people safe, and to provide a safety net for workers and families in economic hard times, among other things. Government programs and actions can provide important supports for our economy and its workers. Economic growth and workers’ pay and employment are inextricably linked as consumer spending, i.e., workers spending their pay, is what drives our economy, representing about two-thirds of all economic activity.

My previous two posts (here and here) focused on efforts to undermine and weaken government. They outlined negative effects of weak government infrastructure and of privatization of public sector work. This post highlights the benefits of government action.

The “Biden Plan,” as the President calls it, uses aggressive federal government action to combat the coronavirus and to stimulate the economy. The first piece of it was an aggressive effort to get people vaccinated along with other steps to reduce the impact of Covid on people’s health. The second major piece, the American Rescue Plan (ARP), was passed in March 2021 and provides $1.9 trillion to combat the pandemic and its harmful effects on workers, businesses, and the economy. It strengthens our healthcare system; provides funding for schools, housing, small businesses, and local governments; and supports low- and middle-income workers by extending unemployment benefits and providing monthly support checks for families with children.

Given the popularity of the American Rescue Plan (75% of voters like it) and support from local and state governments (including a number of Republican governors), it wouldn’t seem to be a partisan issue, but every Republican member of Congress voted against it. Every President, Democrat or Republican, from WWII to 1980 used government actions to support the economy and workers, and to ensure that the rising tide did indeed lift all boats somewhat equitably. [1]

However, since 1980, Republican ideology has opposed such government action, taking the position that government action is unnecessary because the private sector, stimulated by tax cuts, will meet society’s needs even in the face of crises and economic recessions. This ideology claims that cutting taxes, particularly for wealthy individuals and corporations, will stimulate the economy, generate growth that will more than make up for the revenue lost due to the tax cuts, and that benefits will “trickle down” to workers.

Republican Presidents Reagan, George W. Bush, and Trump all cut taxes and in every case the economy did NOT boom, tax revenue did NOT grow, and workers did NOT benefit, but the deficit DID grow substantially. Republicans’ concern about the federal government’s deficit seems to only apply to Democratic initiatives. Moreover, Republican President George H. W. Bush promised not to raise taxes when he ran in 1988, but when the previous Reagan tax cuts led to dramatic growth of the  deficit, Bush raised taxes to reduce the deficit – for which he was basically disowned by the Republican Party.

According to Republicans, the American Rescue Plan and any government actions like it will (supposedly) kill economic growth and job creation, leading to high unemployment and growing deficits.

However, recent economic data show that Republican predictions have NOT come true. Rather, the data show growth in the number of jobs, falling unemployment, increased pay for workers, a growing economy, and a falling deficit. This provides solid validation for the government actions President Biden and Democrats in Congress have taken in response to the pandemic and its negative effects on workers and the economy. By the way, economic and job growth also occurred after Democratic President Clinton raised taxes. Moreover, the resultant increase in revenue and economic growth made the deficit disappear! Both the current experience and that under President Clinton clearly debunk Republican fear mongering about tax increases, a strong safety net, and government intervention in the economy.

Perhaps convinced by these data, 19 Republicans in the U.S. Senate (out of 50) along with all 50 Democrats voted for a $1 trillion infrastructure bill that will make major government investments in roads, bridges, railroads, mass transit, water systems, pollution clean-up, and high-speed Internet access among other things. This spending over the next ten years is projected to create 3 million jobs.

However, Republicans are still unified in opposition to an additional $3.5 trillion infrastructure bill that would address climate change and more directly support workers and their families through funding for education, health care, housing, paid family leave, elder care, early education and child care, and making the temporary child tax credit of the ARP permanent. This last provision alone is projected to cut child poverty in half – disproportionately benefiting children of color – and would keep families with children from slipping back into poverty if the temporary ARP child tax credit were allowed to expire. The climate change investments in clean energy and reduction of carbon emissions are likely to save trillions of dollars in damages and mitigation measures that would occur if climate change continues unabated.

In response to Republicans’ concerns about the costs for the infrastructure bills, Treasury Secretary and former Chair of the Federal Reserve Janet Yellen said: “My largest concern is not: What are the risks if we make these big investments? It is: What is the cost if we don’t?” [2]

I encourage you to let your U.S. Representative and Senators, along with President Biden, know that you support government investments in our infrastructure to support a strong economy, and workers and their families as well.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Richardson, H. C., 8/10/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-10-2021)

[2]      Richardson, H. C., 8/10/21, see above

2 thoughts on “HOW THE GOVERNMENT CAN SUPPORT THE ECONOMY AND WORKERS

  1. Yup. Let’s just hope Biden and others in Congress can convince the conservative Democrats – or whatever we should call them – to go along with these important policies and investments in workers and families. And by the way, it might start to tip the economic playing field back a bit toward fairness and equal opportunity.

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