How the $2 Trillion Bill Will Affect the Economy
Have you noticed how money is being treated like an unlimited resource that can’t run out lately? Maybe not by you and me, but by good old Uncle Sam? While this is by no means a new phenomenon, it has become more of the norm over the last decade than it should. Take President Biden’s proposed $2 million infrastructure bill, for example. If you’re on the fence about whether this bill will be a good thing or a bad thing, think about what would happen to your personal finances if you managed them the way our country is managing its finances.
Your savings account would be history, you’d be too deep in debt to possibly get out, and you might even end up being evicted from your home. So how is it that our government can continue to spend recklessly with seemingly no consequences?
The truth is, there are consequences every time our nation spends money it doesn’t have, and we’re likely to start feeling them soon enough. Here’s how the $2 trillion infrastructure bill will probably impact our economy.
Send Businesses Overseas
As part of the $2 trillion bill, corporate taxes will likely be raised significantly. If proposed tax hikes are implemented, they will once again cause the corporate tax rate (state and federal combined) to skyrocket until they are close to the highest rates in the entire world. The race to highest taxes is one we don’t want to win!
As tax rates increase, overseas investors will stop setting up facilities here and American companies will begin to invest abroad. We know this is true because it’s happened before when the corporate tax rate here was too high. Both of these things will hurt our economy and cause us to be much less competitive worldwide.
The tax hike will also hurt our manufacturers. Though approximately $300 billion is earmarked to help the American manufacturing industry, the concurrent tax hikes will offset the potential benefits of the stimulus.
Add Unnecessary Costs to Housing
Though the looming infrastructure plan is supposed to help the housing market in a lot of ways (including by injecting billions into the housing sector), it adds unnecessary costs to projects that could otherwise be completed much more affordably. This is because government intervention typically comes with expensive requirements.
Take the housing industry in California, for example. The government-mandated solar power requirement enforces all single-family residences to have solar panels. This requirement adds approximately $9,000 to the cost of a home in the Golden State. As this situation illustrates, government involvement in economic development often comes with additional costs.
Excessive Time on Construction Projects
In addition to expensive government-mandated requirements, government intervention often tends projects to get drawn out over long periods of time. This is because of the many regulations and mandates associated with government-run projects. Like the housing sector, there are typically time-consuming (and often unnecessary) hurdles involved with any construction project overseen by the government. The private sector, on the other hand, generally knows how to complete large construction projects with minimal time and cost.
Consider, for example, that a large bridge might take the private sector two or three years to build, while that same bridge would likely take 10 or more years to be built by the government. The private sector doesn’t have as many mandates and regulatory constraints as the government imposes. If the private sector were given the freedom to rebuild without government intervention, it would probably be able to make improvements much quicker.
A Better Way?
If the government truly wants to help, there are arguably better ways to do so than by injecting massive amounts of money we don’t have into the economy, then turning around and levying some of the highest taxes in the world against businesses and individuals. By cutting wasteful spending, allowing businesses to operate normally and lowering taxes, the government would effectively be able to help the economy naturally rebound after the devastating effects of a global pandemic.