Trump and Hochul’s Free Lunch

Generosity with other people’s money — i.e., taxpayers’ dollars — is one of the hallmarks of modern politics, fie on the economic consequences. So feature the plan, courtesy of President Trump and House Republicans, to deposit $1,000 in so-called MAGA accounts for every newborn. Plus, too, Governor Hochul is eyeing $400 checks for New Yorkers. These schemes breach a basic rule of economics: There’s no free lunch.America learned that lesson anew, the hard way, during the Biden-Schumer wave of inflation. It saw consumer prices spiral some 20 percent over the course of Mr. Biden’s presidency, and the prices show no signs of reverting any time soon to pre-Biden levels. A primary culprit was the tsunami of federal overspending, including Covid stimulus checks that aimed to put extra cash in Americans’ pockets and spur growth.Wouldn’t you know it, though, but all that seemingly free cash from Uncle Sam — ultimately borrowed from America’s creditors — ended up causing prices to surge. In all, some $5 trillion went out in Covid stimulus spending. Of that total, $1.8 trillion went directly to families and individuals. It’s a matter of Economics 101, supply and demand, that all this extra money chasing after the same level of products and services would lead to higher prices.So it is that Americans ended up paying — and are still paying, and will continue to pay, in perpetuum — for all that purportedly free stimulus money in the form of persistent higher prices. It was one of the critical issues in 2024 and helped hoist Mr. Trump into the White House. What’s the logic, then, of congressional Republicans and Mr. Trump, or Mrs. Hochul in New York State, repeating the mistake by making direct handouts to the citizenry?The irony of New York’s scheme is reflected by Mrs. Hochul’s designation of the handouts as “Inflation Refund Checks.” Only among Albany’s ruling Democrats, it would seem, could it make sense to try to palliate the pain of price increases by issuing another round of the very kind of stimulus payouts that triggered the inflation in the first place. The checks, up to $400 apiece, will go out to some 8 million households across the state.“This is your money and we’re putting it back in your pockets,” Mrs. Hochul dissembles. One could almost see fit to applaud this all-too-rarely seen sentiment among the Democrats. Yet if New York finds itself in a position of having surplus cash on hand, the far better approach would be to lower the state’s astronomical tax rates. That would stimulate the state’s economy from the supply side and provide lasting relief to New York’s long-beleaguered taxpayers.As for the “MAGA accounts” — short, Bloomberg reports, for Money Account for Growth and Advancement — a spokesman for Mr. Trump touts them as a way to “empower American children to reap the American Dream with a strong financial foundation.” Yet the idea of a federal handout to newborns is unprecedented, and previously backed — under the name of “baby bonds” — mainly by liberals like New Jersey’s loquacious senior senator, Cory Booker.The measure pitched in the House GOP’s tax bill calls for a thousand spondulix to be “seeded” in the new accounts “for each American baby born in the next few years,” per Bloomberg. Yet parents of children below the age of 8 could set up MAGA accounts, too. The inflationary implications of these free accounts could, one imagines, be mitigated by the funds being “invested in US equities and locked up until the child turns 18.”The money, too, is meant to be used for education, training, or buying a first home. Another basic economic rule, though, is the fungibility of money. With a $1,000 windfall in a MAGA account, parents could well see fit to spend that amount, or save that much less themselves. No matter how well-intentioned, government handouts — whether via “MAGA accounts” or inflation rebates — are a poor substitute for letting taxpayers keep their own money.

Trump and Hochul’s Free Lunch

Trump and Hochul’s Free Lunch

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