In Phil’s cheery piece this morning on our long-term, slow-moving entitlement disaster, he says, “Right now, instead of grappling with fiscal reality, Democrats are rushing to enact an additional $4.1 trillion in new spending (a portion of it, it should be noted, with Republicans’ blessing).”
The new spending is troubling enough, but it’s worse than that: We haven’t even spent all the old spending yet.
According to the Center for a Responsible Federal Budget’s COVID Money Tracker, about $1.4 trillion that Congress has already allocated for COVID relief has not actually been disbursed. That includes money from the CARES Act, the very first COVID-relief bill signed by then-President Trump in March 2020.
It may seem quaint to say it these days, but $1.4 trillion is still a lot of money. We don’t know the full economic impact of the money that has already been spent, and there’s still so much more to go. Social Security’s sorry state is just another argument against new spending.
The economic effects of government spending only take place once the spending actually happens. As anyone who has ever been owed money knows, a promise to get paid is not the same as getting paid.
There’s a lag between policy creation and policy implementation (called “inside lag”) and between policy implementation and economic effect (called “outside lag”). A year and half after passage of the CARES Act, we’re still in the inside-lag period on some parts of it. We’ll still be in the outside-lag period for years to come.
It’s one of the strongest arguments against stimulus programs: Even if you calibrate the amount of stimulus perfectly to counteract an economic downturn, it still has to be implemented, and that implementation takes lots of time. By the time it’s all implemented, the crisis may well be over.
We seem to have reached that point with the pandemic recession. Congress’s time and effort would be much better spent ensuring that Social Security and Medicare will continue to exist. But they’ve still got a few election cycles to play with until benefits will have to be cut, so don’t get your hopes up.