This week the $1.9 trillion “American Rescue Plan” was passed. Yet only a paltry 9% (or less) of the stimulus will be spent on actual public health measures. Rather, it is a wish list of the left’s pet projects that has very little to do with reducing the spread of the virus.
On this episode, Heritage Budget expert David Ditch breaks down the monstrous spending package, gives us insight as the where the money will actually go, and explains the disaster this is for the future of America.
Tim Doescher: From the Heritage Foundation, I'm Tim Doescher, and this is Heritage Explains. D.C. is quiet right now. Government mandated closures and limitations on business have halted this once vibrant city to *crickets* Okay. Maybe it's not that bad, but it's still very quiet. In addition to the limitations brought on by COVID, I'm sure you've seen the photos of razor wire fencing surrounding the Capitol building, and of course the brave National Guard posted up. It screams to the average citizen, "Stay out!" One place that isn't closed is Congress. In fact, they're very much open and moving quickly to pass laws that have a massive impact on our nation. This means we have several reasons to press in and continue to hold them accountable. Most recently, we have 1.9 trillion reasons to hold them accountable.
Clip 1: We're on the verge of what could be a major economic boost in this country as President Biden prepares to sign the $1.9 trillion bill he's calling the American Rescue Plan.
Clip 2: If you look at this vote and you look at what is in this COVID bill that Abby just outlined before, you understand this isn't transitional, this is transformational.
Clip 3: Mr. President, it's been a long day, a long night, a long year, but a new day has come and we tell the American people help is on the way.
President Joe Biden: I promised the American people that help was on the way. Today, I can say we've taken one more giant step forward in delivering on that promise that help is on the way.
Doescher: Help is on the way. It's a good phrase, but it requires us to accept the premise that spending $1.9 trillion will actually help the Americans that need help. So, how will this money be spent? How much will be used for COVID-19 relief? What about all the other money we have spent to help Americans during COVID? This week, we talk to David Ditch. He works in the Hermann Center for the Federal Budget here at the Heritage Foundation. On this episode, he talks about the deeply flawed COVID-19 package and how instead of addressing actual recovery with temporary and targeted spending to provide things like testing and vaccine distribution, it's a wasteful spending bill that prioritizes the left's pet projects.
Doescher: But first I wanted to ask you to hit that like button, hit that subscribe button or leave us a comment wherever you listen to the podcast. I know each week we ask you to do this but really never explain why it's so important. Well, it is indeed important because each rating and review gives the podcast a small bump that pushes us higher in the rankings. The higher we're ranked, the more exposure we get and the more we're able to educate on these important issues. So thank you so much for your continued loyalty and thank you for helping us grow. Go ahead, hit the pause button, go like, go share and leave us a comment right now. I'll give you a second. Okay. Let's get into the interview. David, I heard that this is your first time at the Heritage Foundation in almost a year?
David Ditch: Yeah. It's been kind of crazy. I've been working remote. The last time I was downtown, it wasn't in lockdown like we're under siege.
Doescher: Yeah. And there wasn't fencing and razor wire around the Capitol.
Ditch: It's mind boggling.
Doescher: Well, welcome home. It's good to have you here. Okay. Let's get into this. This is a bad, bad, bad spending bill, and it's $1.9 trillion. That's an astronomical amount of money.
Ditch: That's a million bajillion dollars. You can't wrap your head around unless you break it down a little bit.
Doescher: I wonder if lawmakers could actually pass that. We're going to pass a million bajillion dollars for COVID relief. Maybe that could be the bill.
David Ditch: They're going to try.
Doescher: Well, let's get into this here. Start us out here. Start us off as to how much money we've spent so far on COVID and then what this money is going to be spent on.
Ditch: Congress has already approved about $4 trillion in COVID relief. That's over $30,000 per household. About $1 trillion of that is still in the process of actually going out the door. This bill would add another $15,000 in spending per households.
Doescher: What do we need to spend more money on if we have a trillion dollars just sitting there. I mean, couldn't that trillion dollars be spent on the stuff that the $1.9 trillion is supposed to be spent on?
Ditch: The funny thing is that Congress did something similar to that just a couple months ago. They took a pot of money that wasn't going to be spent very well, at least they thought, and they use that to cover most of the new spending that went out the door just in December. They could look at the trillion dollars and say, oh, a lot of that is loan programs that either maybe they don't think they're important. Maybe they don't think they're going to be spent. They could redirect some of that funding and point it at priorities, but they have no appetite for anything that might potentially reduce spending right now.
Doescher: Interesting. Basically the answer is there is no reason they're just passing more money to spend more money.
Ditch: That's the goal, ultimately.
Doescher: Wow. Okay. Yeah. $1.9 trillion, it kind of sends a message, we're serious about the pandemic, I guess. So talk about how serious about the pandemic this bill actually is.
Ditch: If you were passing a bill based on the fact that we're in the middle of a pandemic, I think you would want to have more than a single digit percentage of that money actually going towards pandemic relief. A lot of estimates are putting that number around like 9% of the spending is public health spending. I went through line by line, I think it's closer to 5%.
Doescher: Wait. So 5% of $1.9, almost $2 trillion, 5% of that goes to COVID relief, or anything related to COVID?
Ditch: Yeah. I mean, in that amount, you're talking about vaccines, vaccine distribution, testing, VA system. And then past that, a lot of it is just sort of subsidizing the healthcare industry.
Doescher: Here at Heritage, we're all about opening up the economy. We want to open up the economy. We think we can do it safely. We think that that's the way back. Part of that is getting kids back to school. Does this bill help kids get back to school?
Ditch: And again, that's one of the supposed justifications is that they want to spend $170 billion in this bill to "help reopen schools". The thing is, we've already spent tens of billions of dollars on reopening schools to the point where non-partisan analysts are saying that more money in this bill is going to be spent four or five, six years from now than is going to be spent now because school districts can't spend the money fast enough that they already have. This is a handout to the very same teachers' unions that in many parts of the country are dragging their feet on reopening the schools.
Doescher: Yeah. Listen, I don't want to sound insensitive here. Many people have been adversely affected by COVID, but just I'm thinking about the current economic climate. I saw the jobs report that just came out; pretty robust, pretty good jobs report. We're seeing growth. Things seem to be doing fairly well considering all that we've been through the last year. With that in mind, $1.9 trillion, it seems overkill.
Ditch: It's frankly, absurd. That amount of money might have made sense back in April. And we need to think back to what things were like in April. We had no idea how deadly disease this would be. We had no idea when we'd get vaccines. Unemployment spiked to 14.8%, the highest since the great depression. The federal government passed the CARES Act, which was $2.3 trillion. It was designed to throw a bunch of money at fighting the pandemic, a bunch of money to put a floor under the economy. I think we could have spent less to have the same effect, a lot less, but the fact is it passed. And now we can look at what's happening on the disease front. Hospitalizations in just the last two months are down 70%, thanks to the vaccines. Unemployment is down by over half from where it was last April. Nothing about what's happening today is a crisis. It's a challenge that we can manage, but we don't need to be spending huge amounts of money to deal with it.
Doescher: Yeah. Huge amounts of money. I'm thinking about this. At Heritage, we cover debt and deficit so well. You guys are just aces on covering it. I just wanted to put into context a little bit of where we are before this $1.9 trillion and where we will be after this $1.9 trillion and what that means long-term for everyday Americans.
Ditch: Right now, the total national debt is $28 trillion, with a T. You're talking about $225,000 in debt per household. And that's before this bill gets passed. And unfortunately, things don't look better in the long-term. Even before the pandemic, analysis showed that we were going to have trillion dollar deficits every single year for as far as we can see because unfortunately too many benefit programs are designed in an unsustainable way.
Doescher: Talk about some of the... Just get a little bit more into the money that's already been spent through the CARES Act and through other spending at a federal level. And now you have this $1.9 trillion. Is there a chance that some of this money is going to go back to taxpayers? I mean, you said there's a trillion dollars that hasn't been spent yet from previous spending. Is there a chance that they just, oh, well, we've done our job and we're just going to send this back to the taxpayers.
Ditch: Unfortunately, no. The closest thing we're going to get to "money given back to taxpayers" is the $1,400 individual checks that, again, are supposedly justified as a way to juice the economy. Well, we already saw what would happen because they already sent out two rounds of checks to individuals last year. And what happened was you saw a big spike in personal savings and in people paying off their personal debts. Now, that's responsible way to take in some extra money that you weren't expecting for yourself, for your family. But that's not a good reason to add to the federal debt and that's what happened, by the way, when unemployment was much higher than it is now, when the economy was in worse shape, it was more locked down. These $1,400 checks are more likely to go into personal debt reduction, more likely to be saved and less likely to go back into the economy.
Doescher: Let's break this down for people from my hometown in Lake Orion. Just to put it in context for them. $1.94 trillion, I mean, this is so much money. It's just you're throwing numbers around. It's just a bunch of money. What does it mean for someone in Lake Orion, Michigan, to have this money? Because again, it's so much, where does it all go? It's got to go out to the people. Is it going to road projects? Is it going to pension funds? Where is it going?
Ditch: If you actually break down where the money is going, some of it is going towards massively expanding the welfare system, which might or might not become a permanent growth of the federal government. But then when you start digging into it even a little bit below the surface, you find one massive handout after another for left leaning constituencies. Big chunk, $350 billion, that's over $1,000 for every American is going to state and local governments.
Doescher: Okay. Yeah. We have to talk about this because that's been the right's big push back. We're going to bail out poorly managed states. What does that mean?
Ditch: It means that even though state and local governments got 10 times more money than they actually needed already, we're going to give them even more than they got in 2020. That's going to come with some strings attached. So for example, Jordy leader Schumer made sure to say that you can't take this money and use it to cut taxes, even though that would actually help stimulate the economy. No, you have to spend it on X, Y, and Z. Well, what a lot of governments are probably going to do is say, okay, we're going to cut the money we were going to spend on those things and we're going to use it to spend on our own priorities.
Doescher: So the money is fungible is the idea. Yeah, sure. I'm wondering, as a cynical person, as my dad always told me, you're far too young to be so cynical son, but that's who I am. I'm nervous that passing this, for at least the next two years, the Democrats will have control. I'm nervous that this just opens up a path for another bill just like this down the road. What are your thoughts on that?
Ditch: They're looking at a bunch of different things. One thing they want to do is take the various entitlement program expansions that are in this bill and make them permanent. And that would more than double the cost of this bill, which is already far too big. Another thing they're looking to do is to spend trillions of dollars on "infrastructure", again, supposedly to juice the economy, but in reality, mostly going to benefit a handful of left leaning constituencies.
Doescher: So it'd be like the stimulus back during 2008/2009 where Joe Biden was in charge of distributing all the money, but it never really went anywhere.
Ditch: And you're left with two bad options. Either they just put this on the national credit card, which is already overloaded, or as Senator Manchin has been saying, what he'd like to do is get rid of all the 2017 tax cuts and use that to pay for more federal spending. That definitely would not help juice the economy.
Doescher: Yeah. Well, there's so much bad in this. I will say the one good thing that we can say that Heritage had a huge part and we consider it a big victory is the fact that the $15 minimum wage was taken out of this bill. How did that happen?
Ditch: There's a lot of technicalities that took place in the Senate that the majority said, okay, well, because of these technicalities, we can't have the $15 minimum wage. The reality is that multiple Democratic senators knew that if you apply the $15 minimum wage to their states, that it would seriously damage the economy. Especially you look at a state like West Virginia, which is a place with lower wages but also much lower cost of living. You don't need $15 an hour to get by, put a roof over your head in West Virginia the way you might in places like New York City, Washington DC, and San Francisco. And unfortunately so many members of Congress who do come from those places imagine that everywhere is New York, that everywhere is San Francisco. But if you applied a $15 minimum wage to a place like West Virginia, that would be the equivalent of an economic nuclear bomb.
Doescher: David, listen, I want to thank you so much for coming in today. It's been a while since you've been at Heritage and I just wanted to say welcome home and thank you for tracking this and we'll stay in touch.
Ditch: Thanks for having me.
Doescher: And thank you so much for listening to another episode of Heritage Explains. Look, this is a huge, huge, big deal. $1.9 trillion package in Congress. There's a lot of waste. There's a lot of stuff to be aware of. So educate yourself so that you can go out and educate others. Michelle's up next week, and we'll see you then.