May 10, 2021

The current policies of taxing and spending are like playing with financial fire – eventually you’ll get burnt.

In 1933, with the country mired in the Great Depression, President Franklin D. Roosevelt set his sights on creating the most comprehensive infrastructure program in our nation’s history, the New Deal.

In a recent attempt to channel FDR’s legacy, President Joseph Biden echoed similar sentiments. Nearly 90 years after the New Deal, President Biden unveiled a $2 trillion American rescue plan that, among other things, claims it will:

  • Upgrade transportation infrastructure
  • Help America’s aging and those with disabilities
  • Boost manufacturing
  • Modernize 20,000 miles of roadway
  • Install 500,000 electric vehicle charging stations
  • Transition the country to low carbon energy sources

It all sounds good, right? But we know better. The government has repeatedly given us reasons to doubt its ability to allocate resources.

In fact, look at FDR. The New Deal actually held the country back with its massive spending and regulations, prolonging America’s financial crisis for years and stymying expansion. There were high taxes, ineffective workplace rules, price regulations, and large government welfare programs. Despite FDR’s spending efforts, unemployment still topped 14% after his two terms. Meanwhile, industrial production and national oil income fell by almost a third during the 1930s.

Some good came of it, though. Social Security and unemployment benefits have remained a lasting legacy. Still, what truly turned things around was manufacturing the necessary machines for World War II, not the New Deal.

So, are we headed for a New Deal 2.0? Hopefully not.

In plain terms, it looks like the infrastructure bill could level our economy. To pay for it, corporate income taxes could rise to 28%.  If so, the U.S. corporate tax rate would be the highest of the 27 countries in the Organization for Economic Cooperation and Development.

And I’m not picking on President Biden. With few exceptions, spending rises no matter what party is in charge.

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