Ladies and Gentlemen, the State of the Union is that of far more government control over the nation’s economy in years. The years following 2022 promise more of the same if Joe Biden has his way with the mega-spending and hyper-regulation embodied in his signature Build Back Better (BBB) agenda. In the speech, look for Biden to ditch or downplay the controversial name, but to call for equivalent spending and intervention regardless. But it hasn’t just been Joe Biden blowing up the balloon.
Since 2020 we’ve seen a parade of bipartisan big spending bills: the Families First Coronavirus Act, CARES Act, the infrastructure package, $768 billion defense, and the likely soon-to-pass bipartisan America COMPETES Act high-tech pork-barrel legislation—and alongside it all, Biden’s own party-line $1.9 trillion American Rescue Plan passed a year ago.
Biden doesn’t need to enact all of BBB—or whatever it gets called—legislatively, but given that the spending spigots already open, he enjoys the flexibility to act “without Congress.” Progressives certainly are urging him to do so.
During the last Democratic administration, Obamacare seemed like as a stepping stone toward fully socialized medicine, while President Obama, in a State of the Union, pitches for an income inequality and middle-class welfare agenda covering the likes of two years of community college and enlarged paid work leave.
We head toward the midterms with calls for more spending despite federal debt exceeding $30 trillion. Even the Congressional Budget Office’s (CBO) Budget and Economic Outlook, which usually appears like clockwork during the last two weeks of January, is tardy with its 10-year forecasts. Perhaps CBO lacks a crystal ball to cope with the Big Bang in government spending. But no matter, the White House says CBO doesn’t know what it’s talking about anyway since BBB is fully paid for and—wait for it—reduces the deficit.
Biden sweeping interventions are rooted in the waging of domestic forever wars advancing a broad progressive agenda from child care to free education to income support. Most significantly, though, are “whole of government” campaigns to advance “equity” and mitigate the supposed “climate crisis.”
Much of this new spending is also regulatory, and advances a number of federal social engineering experiments. And since one of the first Biden administration actions was to jettison regulatory cost-benefit analysis and convert the Office of Management and Budget’s regulatory watchdog role to one of advancing’ regulatory initiatives, the regulatory “debt” is climbing too, along with the fiscal one. Biden calls this “Modernizing Regulatory Review.” Deficits alone now are larger than the entire federal budget was not so long ago, but we at least know the amount. No one has any idea how much regulation costs or will cost.
On the economic front, Biden has on numerous occasions called himself a “capitalist,” but he has a program for government steering of the private sector that spans from meatpacking to big tech. He and Attorney General Merrick Garland threaten new antitrust regulation and creative use of old statutes to crack down on “anti-competitive” behavior across the board, a compulsion shared with the GOP. There are also “public-private partnerships” and government infrastructure like electric vehicle charging stations that see little use.
Meanwhile, monopolistic federal control of entire sectors and Washington’s gargantuan influence in the marketplace as the world’s largest purchaser—to the tune of $500 billion in annual contracts—are perfectly fine.
We are in the throes of a Big Bang reinflation of the regulatory state without the limited traditional constraints, not that those worked anyway. Deeming Trump’s deregulation architecture as “harmful,” Biden got rid of all traces of Trump’s regulatory streamlining, from the requirement to eliminate two rules for every significant one added to guidance document review procedures and public-access portals for agencies to disclose sub-regulatory decrees that might have regulatory effect. In addition, agencies that set up regulatory disclosure and streamlining procedures—such as sunsetting-and-review requirements at the Department of Health and Human Services—ditched them under Biden.
Inflation is also a big part of the State of our Union. But when Biden claims he is going to “lower costs” for consumers by making government even bigger, the watchdog media asks only how he can get BBB passed in Congress, not why it should pass at all.
Regulatory burdens and costs of government intervention draw much less public rebuke than taxes, because they are concealed in the prices of goods. But those prices lately are rising a lot. Dollar Tree is now the Buck and a Quarter Tree.
When politicians find it difficult to raise taxes to pay for their policy goals, they regulate and issue decrees. The Biden administration, echoing the “pen and phone” Barack Obama invoked, showing a willingness to act without Congress by presidential decree, as Biden already attempted with vaccine mandates.
Much of the economy has long been extensively directed by Washington regulators rather than market forces, and Biden is “trillioning down” on that, putting competitive enterprise into what will be even greater binds in the future. Markets can deal with firms to big to fail—what we cannot afford is a federal government too big to succeed.
Instead of more spending and regulation, we need sweeping liberalization to remove the impediments that hobble wealth creation and enterprise. We need privatization rather than public-private partnerships and heavy technology spending in the name of fighting foreign competition.
The United States—only 244 years old—became richer than the rest of the world in a historical blink of an eye, but is slipping in economic stature as well as its rankings like the Heritage Foundation’s Index of Economic Freedom. It is important to remember how that remarkable leap in human well-being occurred and how it can be sustained. It wasn’t through centralized power.
Our economic downturns are attributable not to market failure but to the failure to have markets, whether from pointless paperwork to Covid-style lockdown. We suffer because of misaligned incentives that reward statism, ranging from the Administrative Procedure Act’s one-way ratcheting upward of regulation for “good cause” to exploitation of economic shocks.
We need to “liberate to stimulate,” to discipline federal spending and regulation. There are numerous steps for achieving this, from regulatory report cards to requiring Congress to approve rules. But such steps to streamline or modernize the administrative state are not enough. With COVID being the third economic shock of the 21st century—to which the response has been government growth and colossal waste—Congress also needs to enact an Abuse-of-Crisis Prevention Act. The crisis in Ukraine unfortunately presents another opportunity for unsavory exploitation to expand the state.
Reelection-minded lawmakers and career bureaucrats do not provide much hope for ending the political predation that dominates policy today. As Friedrich Hayek pointed out, the politicians blamed during an inevitably bumpy transition to something closer to healthy free enterprise will be those who work to stop the flow of political spoils, bring down inflation, and unwind market-distorting regulations—not the ones who started those costly interventions in the first place.
Real stimulus—involving comprehensive economic liberalization—requires politically difficult changes in what people expect from the federal government. Leadership requires taking on that challenge, not just with respect to government spending, but with the “other national debt”—the regulatory state and the government-expanding ways in which policy makers usually respond to emergencies and economic shocks.