- Only 0.6% of “pandemic aid” for vaccines: Where’s the rest?
- $173 million in “aid” for a county government that doesn’t exist!
- The worst possible way to pay for infrastructure
- Job recovery milestone (OK, contain your enthusiasm)
- De-dollarization chronicles: The mainstream wakes up
- Italian restauranteur sanctioned for trading in illicit oil (what?!)… reader gives AOC’s change of heart the side-eye… how much of the infrastructure plan is “shovel ready”?… and more!
Not that anyone cares, aside from a few of us heretics to the faith of limitless federal spending, but Uncle Sam’s expenditure on vaccines amounts to only 0.6% of what’s been billed as “pandemic aid.”
If you add up the CARES Act and the year-end 2020 “stimmy” bill passed during Trumptime… then throw in the American Rescue Plan Act signed into law by Joe Biden last month… you’re looking at about $6 trillion total, according to the nonpartisan (but heretical) Committee for a Responsible Federal Budget.
Of that $6 trillion, a mere $37 billion was devoted to Operation Warp Speed.
The other 99.4%, you ask?
“By and large, most of the other money goes to cover the cost of mistakes made by state and local politicians. Specifically, because of the lockdown measures they adopted,” writes fellow heretic Craig Eyermann at the Independent Institute.
“The sheer immensity of this spending is hard to grasp,” adds another heretic, Brad Polumbo at the Foundation for Economic Education.
Polumbo dug up research showing the total cost of the New Deal — heretofore the ne plus ultra in ambitious federal spending outside of wartime —as $41.7 billion in 1930s dollars. In present-day dollars, that works out to $778.2 billion.
And so “pandemic aid,” even after adjusting for inflation, is nearly eight times as costly as FDR’s brainchild.
We interrupt our lament for some comic relief.
Under the American Rescue Plan Act… the government of Hartford County, Connecticut, is set to receive $173 million in aid.
“There’s only one problem,” writes Jared Walczak of the nonpartisan (but also heretical) Tax Foundation: “the government of Hartford County doesn’t exist, nor do any of Connecticut’s other counties have county-level government despite being allocated a collective $691 million under the bill.”
By Walczak’s accounting, the law will spend nearly $2 billion on “counties without governments or independent revenue streams” — for instance, eight counties in Massachusetts where county-level government was dissolved in recent decades.
But all of that is old news. Team Biden is already moving on to new spend-a-palooza priorities, ones even they acknowledge can’t be labeled “pandemic aid.”
We’re speaking, of course, of the $2.3 trillion “infrastructure” proposal. (Why, oh why, can’t government and the media use plain-English terms like “public works”?)
We understand not everyone in the administration is on board with this proposal, by the way. From The Washington Post a few days ago: “Some people close to the White House said they feel the emphasis on major physical infrastructure investments reflects a dated nostalgia for a kind of White working-class male worker.”
Anyway, the Tax Foundation’s heretical president Scott Hodge reminds us that by the Congressional Budget Office’s own reckoning, every $1 increase in federal “investment spending” ends up reducing investment by the states, localities and the private sector by 33 cents.
And then there’s the matter of how it’s being paid for.
“There are three basic ways of covering the cost of federal investment,” Hodge writes: “increased borrowing, raising taxes or reducing other spending in the budget…
“CBO finds that the only option that does not lead to negative economic consequences is to offset the cost of investment by reducing other noninvestment discretionary spending in the federal budget.”
Yeah, guess which door the White House is opting for? “The Biden administration has chosen the most economically harmful method of financing infrastructure spending,” Hodge says.
As perhaps you’ve heard by now, the aim is to cover the $2.3 trillion in costs over 15 years by jacking up the corporate income tax rate from 21% to 28%, along with some tweaks to the corporate tax code.
“High corporate taxes divert capital away from the U.S. corporate sector and toward noncorporate uses and other countries,” wrote Harvard’s Mihir Desai in 2012.
“They therefore limit investments that would raise the productivity of American workers and would increase real wages. This is the cruel logic of a corporate tax in a global economy — that its burden falls most heavily on workers.”
Separate research from the American Economic Association finds workers shoulder about 50% of the corporate tax burden — with women taking a disproportionate hit.
Reason writer Billy Binion — the heretic who brought all this research to our attention — also points out the socialist paragons of Norway, Sweden and Denmark all have corporate income tax rates in the same neighborhood as America’s current 21%.
The Nordic nations’ individual tax burden might be high, but “the governments of Denmark, Sweden and Norway all understand that relatively low corporate taxes are better for productivity,” Binion writes, “and thus better for society.”
Still… some are going to make money off all of this. Might as well make sure one of them is you.
Last night, our investment banking veteran Nomi Prins took the wraps off a project that aims to help everyday folks like you profit from the infrastructure push… as well as the broader “reopening” of the economy.
For several years, she’s been helping readers profit from the shower of money created by the Federal Reserve. Usually that shower benefits only Wall Street fat cats… but Nomi has guided readers to gains within the past year like 140% on Walgreen’s… 172% on Twitter… even 392% on Wynn Resorts.
Now she’s taking her proven research to the next level — identifying the biggest potential winners from the White House-congressional spending spree.
She has her eye on five stocks in particular… and she shared the details on each one last night. “I don’t think another opportunity like this will occur until the 2030s!” she enthused.
You can watch the replay of this event right here — but you won’t want to waste any time doing so. The replay will remain online only through midnight tomorrow night.
The markets are closed for Good Friday… so it won’t be until Monday when we see what kind of reaction this morning’s job numbers generate.
The wonks at the Bureau of Labor Statistics conjured 916,000 new or revived jobs for March — well above the consensus expectation.
On the big chart from Calculated Risk, depicting the job losses and recoveries from every post-World War II recession, the red line is once again moving decisively in the right direction. Heck, we’re finally better off now than we were during the worst of the post-2008 job losses.
Click to enlarge
One sour note, though — average hourly earnings fell 0.1%, versus expectations for a 0.2% jump.
The official unemployment rate fell from 6.2% to 6%. The real-world unemployment rate from Shadow Government Statistics — including part-timers who want to work full-time and working-age people who gave up looking for work, no matter how long ago — inched down to 25.7%, which is no better than it was two months earlier.
From our de-dollarization chronicles, we see the greenback’s share of global currency reserves is now around 59% — the lowest in 25 years. That’s according to figures from the International Monetary Fund.
Bloomberg’s spin is interesting. It almost reads like something from The 5: “The slide came in a quarter when a gauge of the greenback fell the most since 2010, and amid questions about how long the dollar can maintain its status as the pre-eminent reserve currency.
“The Chinese renminbi is transforming into a force to be reckoned with in currency markets, with more yuan changing hands than ever before in London, the world’s leading foreign-exchange center.”
That said, the yuan is still a bit player at 2.3% of global forex reserves. The euro, meanwhile, accounts for 21.2%.
Bloomberg cites an expert who says the U.S. figure is a momentary statistical anomaly, and for all we know it’s exactly that. But to even broach the possibility down the road that the dollar will lose its reserve-currency status? The mainstream wasn’t doing that when we first started tracking the “de-dollarization” movement in May 2014.
What’s changed? The Bloomberg story didn’t say… but clearly, it’s Washington waging economic warfare against one-tenth of the world’s countries with sanctions and other punitive measures.
The collateral damage of this warfare reaches far beyond Washington’s targeted regimes in Russia, China, Iran and so on. It’s why the French finance minister complained in 2018 about Washington acting as the “economic policeman of the planet.”
Which brings us to this preposterous story…
On Jan. 19… Verona, Italy restauranteur Alessandro Bazzoni wound up on a U.S. Treasury blacklist of people and companies supposedly trading in Venezuelan crude oil.
Turns out Washington was targeting a different Alessandro Bazzoni and companies tied to him. But somehow the man from Verona was caught in the net.
“Legal experts say this type of mistake happens regularly and can be costly,” reports the BBC.
“Sometimes,” Hong Kong-based attorney Nicholas Turner says, “the government is using information that anyone can find online. If that information hasn’t been properly verified, it’s easy for mistakes to happen.”
On Tuesday, the Treasury Department deleted the restaurant owner from its list. Gee, that took only, what, 2 and a half months to resolve?
“Anybody who believes Alexandria Ocasio-Cortez has had a ‘centrist’ transformation is either naive or foolish — take your pick,” writes a reader after we noted on Tuesday that she’s loudly thrown her own movement under the bus.
“Rigid ideologues — even ill-informed (what a euphemism) ones like her — do not transform like that. Very likely, a mentor has advised a shift in rhetoric and jargon, not an abandonment of totalitarian underpinnings.”
The 5: Maybe. Some days, we can be convinced that hardcore revolutionaries are transforming elite institutions from within.
But most days, it still looks as if those elite institutions are successfully co-opting the revolutionaries, enforcing woke doctrine as cover for concentrating even more wealth and power in their own hands.
Either way, we just try to keep our head down.
Our earlier musings about “infrastructure” this week brought a couple of reader reflections…
“All the talk about Biden’s infrastructure bill is just a waste of time because of the time it takes to do environmental studies and then get permits — often two–five years. Remember Obama’s shovel-ready jobs?
“Unless they can pass a law to speed up permit time, it’s all just talk.”
The 5: True, but that’s not where the lion’s share of the money would go.
More than a quarter of the bill, $621 billion, is for “surface transportation.” That probably means shoring up existing roads and bridges rather than new construction.
The next-biggest line item is long-term care for the elderly and disabled under Medicaid at $400 billion — which could be loosely construed as “health care infrastructure”? Maybe?
Then there’s $300 billion to shore up domestic manufacturing, which sounds like a gravy train of subsidies for existing players with existing factories. And then $213 billion on affordable housing, which includes “retrofitting” as well as new construction.
Whelp, there’s over $1.5 trillion of your $2.3 trillion tab right there…
“Fixing infrastructure is labor-intensive with many semiskilled jobs (jackhammering for example),” writes another reader.
“Most of the projects are small enough to be done by smaller consultancies and contractors.”
The 5: For sure, much of the task of rebuilding highways will be farmed out to local contractors. But again, look where so much of the money’s being spent.
Which means there will be ample opportunities for publicly traded small-cap companies — generally defined as having market caps between $300 million and $2 billion — to cash in. You don’t want to miss out.
Try to have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Step back for a moment from the “infrastructure” nitty-gritty.
Our investment banking veteran Nomi Prins sees three economic trends barreling toward each other… and five stocks with the biggest potential to soar when those trends start converging.
Some of them are infrastructure related. Others stand to benefit from the “reopening” of the economy.
But all of them are high-potential… as she laid out in an exclusive briefing last night.
The replay of this briefing is available to watch only through midnight tomorrow night. Click here to watch before the link goes dead.
