On March 25, 2020 Congress passed the $2.9 trillion CARES Act. It was a wrongheaded, but all-too-typical response from Congress to the immense damage (tens of millions unemployed, millions of businesses either destroyed or critically impaired) caused by panicky politicians in response to the coronavirus. President Trump sadly signed the CARES Act into law two days later.
Rep. Thomas Massie was the only congressman to protest the errant bill. Errant is putting it lightly. To see why, ask yourself if any U.S. state could have closed businesses and locked its citizens down for weeks and months absent federal subsidization. Hopefully the question answers itself. In near unanimous fashion Congress, along with President Trump, extracted nearly $3 trillion from the world economy in order to subsidize lockdowns without endpoint around the United States.
How very tragic. Absent a CARES Act supported by a Congress with seemingly unlimited funds, there’s no way the lockdowns and business closures would have lasted more than a week. Bank on it.
Rep. Massie was right back in 2020, while situationally-for-freedom Republicans were wrong. That the Democrats voted for a massive spending increase was a given, and they’ll be spared criticism here. The shame lies with Republicans. They missed (as they always do) the memo that it’s easy to be for freedom and limited government during periods of calm, but that’s not enough. We need them to stick to their rhetoric when all about them, including their president, are losing their heads. In 2020 Republicans panicked, and as a consequence they handed governors across the country the financial wherewithal to take the freedom of their citizens.
That Massie was uniquely right in 2020 rates mention in light of a recent post by the Kentucky representative on X. About government spending, Massie wrote that “I have come to the conclusion that an economic catastrophe must happen before a majority of my colleagues will get serious about curbing out of control government spending.” How could Massie, who got the CARES Act so right in 2020, get the truth about government spending so wrong? Think about it.
Massie concludes that “an economic catastrophe must happen” before a majority of his colleagues will be get serious spending…He doesn’t mean that, does he? What about 49 million Americans losing their jobs overnight wasn’t enough of a crisis for Massie and his colleagues? Yet spending has only grown since, which is the point.
Indeed, it pains me to say that my favorite congressman in Massie is framing the government spending problem backwards. And in doing so, he’s obscuring the real crisis. Massie’s stance implies that the economic crisis is in the future, and that it will be born of investors cutting off the flow of funds to the U.S. Treasury. That’s not true.
In reality, recovery will begin once the flow of funds to government ceases. How could the U.S. economy be hurt by Congress having reduced control over the flow of resources always and everywhere produced in the private sector?
Glossed over by Massie and all-too-many deficit hawks is that the economic sin is the extraction of resources, not how the resources are extracted. To focus on how the money is extracted (whether through taxes or borrowing) is to draw a distinction without a difference. It’s a short way of saying the economic catastrophe is now, both seen and unseen.
The seen of the spending crisis was felt most recently and most profoundly in 2020 when, as previously mentioned, Congress and President Trump handed governors across the U.S. the financial means to lock their citizens down. As for the unseen, consider that the early investors in Facebook got 10% of the company for $500,000, while 25% of Apple could be had for less than $100,000 back in the 1970s. Think of all the great, world-changing companies and advances that weren’t funded and that aren’t being funded because government annually extracts so much wealth from the private sector. Yes, the biggest most crippling aspects of the spending crisis are unseen.
Which is why Massie will hopefully change his tune. In suggesting that the crisis born of government debt is a tomorrow concept, Massie is joining an echo chamber with ten Rose Bowls full of politicians, pundits and economists who’ve told us for decades that a crisis awaits. Except that it doesn’t. Treasuries are the most “owned” securities in the world, which means that if Massie is right, markets aren’t stupid as much as they’re incredibly stupid.
Rather than talk about the tomorrow that never comes, and that information-pregnant deep markets signal won’t be coming, Massie must train his focus on the here and now. Because that’s the crisis. What companies and jobs aren’t being created, what technological and health advances aren’t being funded, and what takings of freedom are being funded because government has arrogated to itself so much of our wealth?
Republished from RealClear Markets
