RUTHFULLY YOURS

It was in 1998 — a mere 23 years ago — that Hugo Chavez first got elected President of Venezuela. From the start, his program was explicitly one of vastly increased government spending, which was supposed to make the economy grow, reduce income inequality, eliminate poverty and bring about social justice. Chavez called the social programs his “Bolivarian missions.” Among some 30 or so such “missions,” big ones included blowout spending on education, subsidized food, subsidized housing and healthcare.

In the early years, things seemed to be going swimmingly, at least if you believed the official statistics put out by Chavez’s government. Not only was there supposedly steady and mostly rapid economic growth (often over 5% per year, particularly 2004-10), but they also regularly crowed about how the redistributionist spending had greatly reduced the rate of poverty. Then, starting around 2013, it all started to fall apart. Today, eight years later, it continues to fall apart. More details on that later.

Yesterday, the Biden White House put out what they call the “American Jobs Plan.” It’s $2.3 trillion of new government spending, on top of the $1.9 trillion just passed, and several trillion more to come, all on top of a $4 trillion or so annual level of baseline federal spending. Yes, it’s blowout government spending, on the usual issues pushed by advocacy groups, which supposedly will shortly achieve all the usual promises of the left: economic growth, increased economic fairness, and social justice. In other words, it’s the Venezuela economic program, blown up to U.S. scale and then tweaked a little here and there to buy off the squeaky wheels of the moment.

As I pointed out in a post on March 8 addressing the previous $1.9 trillion (“Could This Be The Very Worst Piece Of Legislation Ever?”), that bill was touted as “Covid-19 Relief,” but in fact only about 5% of the spending was for anything that could be called actual public health measures related to the pandemic. The rest was “a grand orgy of vote buying and giveaways to left-wing interest groups.” Following the same playbook, this $2.3 trillion monster calls itself an “infrastructure” plan:

The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China.

But if you look for the numbers, you find that only a small minority of the money goes to anything you might think of as “infrastructure.” In the White House release about the new plan, no specific budget numbers are attached to any of the various programs and initiatives. However, they seem to have given out some proposed numbers to reporters, and the New York Times front page today has a chart of how much will supposedly go to what per the White House proposal. That chart gives a figure of $115 billion for “roads and bridges,” which at least sounds like infrastructure, but is only about 5% of the $2.3 trillion. Another $85 billion is said to be for “public transit,” which likely will be at least in part for infrastructure, although all the public transit money in the last bill got dissipated on operating subsidies (i.e., payoffs to union supporters). Add in several other smaller items, and maybe you can see your way to honestly calling at most 25% or so of this an investment in “infrastructure.”

But let’s look at the big numbers.

• Far and away the biggest line item is $400 billion said to go “to expand caregiving for those who are older and those with disabilities.” That’s not remotely “infrastructure.” It’s also something that’s already mainly paid for by Medicare and Medicaid; but hey, the SEIU can use a few tens of thousands of extra members, so let’s throw them an extra few hundred bil.

• Next biggest line item is $213 billion for “affordable housing.” Yes, that is the very thing that the Manhattan Contrarian has called (in this January 2016 post, among many others) the “worst possible public policy.” Also, it’s not anybody’s idea of “infrastructure.” In that 2016 post I said this about subsidized public housing: “[What makes] subsidized public housing so terrible as public policy are the very things that make it so attractive to cynical left-wing politicians. Subsidized public housing creates a permanent and immobile dependent class trapped in poverty that perceives itself as owing its somewhat desirable homes to the incumbent politicians, and therefore can be counted on as a secure bloc of bought votes.” Public housing inevitably goes into a death spiral of poor maintenance. The New York City Housing Authority has recently presented the taxpayers with a bill for $32 billion for capital upgrades that they supposedly never anticipated. Hey, maybe that’s part of Biden’s $213 billion. Sorry about that, red states. In another few years, we’ll be back for another $32 billion.

• Third largest line item is $174 billion for “electric vehicle incentives.” Again, that’s not remotely “infrastructure,” but I guess it will settle once and for all the battle between Elon Musk and Jeff Bezos for the title of “world’s richest man.” What it won’t do is make electric vehicles “zero emissions,” when grid power comes 80% from coal and natural gas. It also won’t make electric vehicles cheaper than low-end internal combustion vehicles, which means that low income buyers will never buy these cars and the $174 billion basically gets split between Musk, rich Tesla shareholders, and rich electric car enthusiasts. For the rich and the mega-rich, it’s a win-win-win!

• Tied with the next two for fourth place is $100 billion for “electric grid and clean energy.” OK, that could arguably fall in the “infrastructure” category, although remarkably up to now we have been able to build and maintain an electricity supply system and power grid almost entirely without federal subsidies (the exception being certain remote rural areas). Do they really think that they can replace all of our fossil fuel power plants and electrical grid for a lousy $100 billion? This item alone could easily run into the tens of trillions if they were serious about it. More likely they will just use the $100 billion to enrich a cadre of political cronies and the whole “zero emissions grid” thing will be long forgotten well before the supposed deadline for achieving it comes some time around 2040 or 2050.

• Another $100 billion item is “public schools.” Somehow, up to now public schools have always gotten built and maintained as a state and local responsibility. Now that the federal government has infinite free money to pass around, I suppose that the teachers unions will appreciate having nice clean, shiny new school buildings to refuse to go to work in. More likely, the feds and the blue states will find a way to send this money straight into the pockets of the teachers unions, in which case, of course, it’s not “infrastructure.”

• And then there’s yet another $100 billion for “high speed broadband.” Broadband, including high speed broadband, is another one of those things that, up to now, have somehow managed to get built without federal intervention. But now that the feds have infinite free money, they can just take over one sector of the economy after another.

There are another couple of dozen smaller items, mostly having nothing to do with “infrastructure,” and all having no prospect of improving the economy, and every prospect of degrading it. It’s the federal government massively expanding its role and its footprint in one economic sector after another — education, healthcare, energy, automotive, tech.

A couple of items on that New York Times front page let you in on the great thinking behind all of this. According to one headline, this Biden program “challenges G.O.P. notions on lifting the economy.” You must understand that the idea that a freedom-based system and relatively low taxes lift the economy is one of those crazy “G.O.P. notions.” The smart people all know that massively higher taxes and spending and government control of everything are the way to economic success and social justice. And then there’s this headline: “Big Bet: Fighting Climate Change Will Add to Work Force.” Yes, our government is now “betting” that if they just provide enough subsidies from infinite taxpayer funds to replace cheap energy that works with expensive energy that doesn’t work, that will “add to the work force.” All the smart people seem to think that that makes sense.

Back to Venezuela. The blowout government spending program in Venezuela got started in the very late 90s, but only really took off around 2004 (after Chavez consolidated control over the national oil company). In a post in 2016 titled “Venezuela: Useful Idiots Roundup” I put together a collection of fawning quotes from left-wing dupes praising the Chavez program as the route to economic success as well as fairness and justice. Featured “useful idiots” included Nobel Prize-winning economist and Hillary Clinton advisor Joseph Stiglitz, Senator Bernie Sanders, actor Sean Penn, and journalists including Richard Gott, David Sirota, and Mark Weisbrot. The quote from Sanders (in 2011) is particularly choice:

These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who’s the banana republic now?

Sirota, writing in Salon in 2013, called the results of Chavez’s program an “economic miracle.”

Here are a few charts of the results of the Venezuelan economy during the period of Chavez/Maduro rule (Maduro succeed to the presidency upon Chavez’s death in 2013):

These charts are from Wikipedia, citing data from the World Bank, IMF and CIA. Note that Venezuela stopped publishing economic data in approximately 2014, so that all numbers after that year are informed estimates. Also, note that these numbers end in 2018. Trading Economics here has an updated figure for Venezuela’s most recent economic “growth” rate for 2019. It is -26.8%. However, they note that other estimates range up to -36.1%. In other words, the economy is much smaller today than when Chavez first came to power in 1998. The inflation rate remains in the range of 1,000,000% or more.

Poverty? They claimed to have reduced the rate from 23.9% in 1999 to 8.5% in 2013. Today, USAID estimates that 90+% of Venezuelans are in poverty. Probably, you have seen the pictures of formerly middle class people going through garbage looking for something to eat.

Sadly, the time scale on which these things play out is not coordinated to U.S. election cycles. In 2013, fifteen years into Chavez’s rule, the government statistics still showed an “economic miracle” (although keen observers knew it was not real). Chavez and then Maduro used the time to change first the election system, and then the constitution, so that removing them from power became almost impossible. How bad is the damage to the U.S. economy being inflicted by the blowout wasteful spending of Biden and the Democratic Congress? Likely, we will only know the first inklings by 2022, and still only a little by 2024.