The Fundamental Economic Problem with Biden’s Rescue Plan, by Antón Chamberlin

It’s never worked, but that’s never stopped devout believers in government that government can tax, spend, and borrow a nation to prosperity. From Antón Chamberlin at mises.org:

March 31 gave us a statement on the American Jobs Plan, and April 28 saw President Joe Biden speak on it to the American people (well, roughly 8 percent of the American people). The goal of the law is the following:

While the American Rescue Plan is changing the course of the pandemic and delivering relief for working families, this is no time to build back to the way things were. This is the moment to reimagine and rebuild a new economy. 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 outcompete China. Public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s. The American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.

By increasing government spending, the Biden administration seeks to address infrastructure like highways, ports, and airports, as well as the electrical grid and broadband internet. For a longer list of the goals of the bill, read the full statement here.

This move, of course, will be lauded by many and disputed by others. But it does not seem too much to assume that both sides will miss the main problem with this bill. The Left will adore it for its brave use of the state to improve the lives of Americans, while the Right will abhor the bill since it is not their preferred form of big government spending (how dare we spend perfectly good money on infrastructure that could be used to murder innocent people in the Middle East?). What both sides fail to recognize is the economic reality of any and all state actions, a reality pointed out to us by Murray Rothbard in his 1956 article, “Toward a Reconstruction of Utility and Welfare Economics.” In that article, without having to rely on a single ethical judgment, Rothbard concludes the apodictic advantages of the market and the perennial waste of government expenditure.

Rothbard begins his reconstruction with two scientific principles: the unanimity rule and demonstrated preference. In Rothbard’s words, Wilfredo Pareto’s Unanimity Rule (reintroduced by Lionel Robbins) states, “We can only say that ‘social welfare’ (or better, ‘social utility’) has increased [sic] due to a change, if no individual is worse off because of the change (and at least one is better off).”1

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