"The Joke’s On Us"
By Bill Bonner
YOUGHAL, IRELAND – "The BBC reports this morning that stocks are rising all over the world… Stock markets hit new records on Biden spending plan Asian markets rose on Friday following a record-breaking session on Wall Street. The S&P 500 broke the 4000-point barrier for the first time, while the Nasdaq and Dow Jones also made gains.
Investors were buoyed by President Joe Biden’s new $2.3tn (£1.7tn) infrastructure spending plan and growing optimism about the economy. Markets in Tokyo and Seoul were up more than 1%, while Shanghai was also in positive territory.
Joe Biden explained his latest plan in historical terms: "This is not a plan that tinkers around the edges. It is a once-in-a-generation investment in America, unlike anything we’ve done since we built the Interstate Highway System and the Space Race, in the 1950s and ’60s. We have to move now. I’m convinced that if we act now, in 50 years people will look back and say, “This was the moment America won the future.”
No Joke: What do you think, Dear Reader? Will spending money we don’t have on “investments” made by beltway insiders really win the future for us? Yesterday, writing our Aprils Fools’ Day Diary, we explained to our wife Elizabeth our bold, new program – supposedly proposed by Team Biden – to correct both the errors of God and those for which man must take the blame. We thought the plan was silly enough to clearly be a joke. But no. “I thought this was a real news item,” said she…
So we made it crazier and crazier to avoid a “fake news” label. Finally, we had to put on an “April Fools’” headline to be sure it was not mistaken for a real news item. Then, a dear reader wrote to say that the real joke was on those who thought it was a joke.
Loopyland: But that’s the trouble with this stage of a Katastrophenhausse. It’s hard to mock. Nothing is so crazy that it can’t be made into a government policy. And while mockery has to stick more-or-less to what is remotely plausible… real life can go far beyond. That is where we are with the latest White House initiative – way out in Loopyland… where 2 plus 2 equals 7… or 5… or whatever you want.
Adding up the numbers using the old math, what we discover about the “infrastructure” program is that it’s as phony as the “union guy” who proposed it. You may wonder why $2.3 trillion would be needed. After all, roads are supported by gasoline and road taxes… And except for the Interstate highway system, they’re a local matter.
Bridges, too, are paid for by users – either via tolls or taxes. Ports? Same story, paid for by the shippers who use them. And airports, by ticket sales. Railroads? Except for the money-losing Amtrak, they are privately owned. If they need more track or rolling stock, they can apply their profits or raise more money honestly. If a new airport is needed, it is easily funded by the people who use the airport. And if it can’t be paid for in such a reasonable and obvious way, why is it being built?
If the Port of Long Beach, for example, needs more capacity, wouldn’t it make sense to charge the ships that come into port with their containers… and the railroads and trucks that haul it away? Of course, it would. They know what is needed and how much it is worth. The feds do not.
Riot of Boondoggles: Which leaves us with the question “Why $2.3 trillion?” Asiatimes.com has the details: "Most of the $2.3 trillion will buy votes rather than infrastructure, including $400 billion for “elder and disability care,” $213 billion for “green and affordable homes,” $174 billion for electric vehicles, $137 billion for “school and childcare infrastructure,” $100 billion for “job training” and so forth. It’s a smorgasbord for Democratic Party urban constituencies that leaves $180 billion for “R&D in tech of the future” and $300 billion in manufacturing subsidies as an afterthought."
Well, that’s the joke. And it’s on you. There is very little real infrastructure spending going on. It’s just a riot of boondoggles and payoffs… a confederation of dunce-like scams…
The additional spending is supposed to stimulate the economy. But that is a scam, too. It will be paid for, says the president, with a hike in corporate taxes. If that were so, it would be merely taking money from people who earned it… and who at least might invest it fruitfully… and giving it to politicians and lobbyists to blow on their pet projects and cronies.
What kind of return do you get on these government “investments?” This from Dan Ferris at The Stansberry Digest: "…in a recent interview with financial TV outlet Real Vision, Hoisington’s Lacy Hunt pointed out that, early in his career – back in the 1960s and 1970s – $1 of government spending might have generated as much as $4 or $5 of GDP within a few years. But today, according to Hunt, that multiplier is negative... It’s about -0.2, resulting in -$1.20 roughly three years after $1 of new fiscal spending." In other words, at this point in the cycle, the more the feds “invest,” the poorer we get.
New Phase of Capitalism: But Biden says we have to “step up”… or the Chinese are going to “eat our lunch.” We need to “invest” money, he says, so we don’t get left behind. He likens this program to the New Deal or the Great Society.
A better comparison is with Amtrak. That was a bold infrastructure initiative, too. With an initial “investment” of just $40 million in 1970, Amtrak was supposed to promptly begin paying its own way. Politicians claimed the public-private structure marked a magnificent new phase of capitalism. They said Americans would soon be flying down the tracks – like Europeans – from city center to city center, with none of the traffic congestion or pollution then plaguing U.S. metropolises. And they expected the new system to be profitable… and to expand its services from sea to shining sea.
Taken for a Ride: And what happened? Joe Biden must have watched carefully from his house, located only a few minutes from the Wilmington, Delaware, Amtrak station. Did Amtrak “win the future”? Nope. The project worked just like all government boondoggles, transferring money from the many taxpayers to the few “union guys” working the rail lines, along with the suppliers, subsidized riders, and others who directly benefited. Most people never set foot on an Amtrak train. But they got taken for a ride, nevertheless. Half a century later, they are still covering Amtrak’s losses. Compared to reality, mockery is limp and wan."
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