What Happens If We Spend 3.5 Trillion Dollars And All We Get Is A Tepid Economy With A Lot More Debt?

When I look at the current 3.5 trillion dollar spending package it reminds me of the American Recovery and Reinvestment Act of 2009. At the time economists were anticipating 3.5% GDP growth and the economy never reached its potential. For the next eight years, we had a very tepid economy and job growth.

The economic conditions surrounding the current economy are more challenging than in 2009. The supply-chain problems are going to leave some retailers without sufficient inventory during the most important buying season of the year. For retailers whose survival depends on Christmas spending, they are screwed regardless of what the government does. COVID-19 restrictions are going to continue to hinder restaurants, entertainment, and travel. Government spending is not going to help them either. The economy in 2021 looks like an economy with no slack and no opportunities to increase capacity until we fix the supply chain and COVID-19 restrictions. The challenge we face is that if government spending does not increase consumer spending by more than 3.5 trillion dollars, we are screwed. Most of the ideas in the spending package are never going to show up on the economic growth bottom line. 3.5 trillion dollars spent on “feel-good projects” is a lot of debt to saddle future generations with.