Soquel, CA…The remarkable and legendary US Senator from Illinois, Senator Everett Dirksen, was noted as saying this line during a discussion of a spending bill before the Senate in the 1960s: “A billion here, a billion there and pretty soon, you’re talking real money.”  Actually, there is no formal record that the Senator said those words…. But the quote is forever linked to the Senator.

During President Jimmy Carter’s only term in the late 1970s, there was a similar comment about the “Misery Index,” which was a combination of the Inflation Rate and the Unemployment Rate. Carter used the Misery Index in his run for President in 1976, defeating Gerald Ford and stating under the Ford Administration, the Misery Index was hurting America. However, in the mid-term of 1978, the Misery Index soared up 19.1%, and Ronald Reagan used the index to underscore the pain that America was experiencing during the Carter era.  To be clear, there were many factors as to why President Carter lost the 1980 election. But that is another story.

The original Misery index was created by economist Arthur Okun during the Lyndon Johnson administration in the 1960s.  The Misery Index helps determine how the average citizen is doing economically and it is calculated by simply adding the annual inflation rate to the seasonally adjusted unemployment rate.  As inflation rises the cost of living increases, and as unemployment rises more people cross the economic line into poverty. Therefore, this index is a quick and dirty metric to gauge the health of the economy since both high unemployment and high inflation are major impacts to the average wage earner.

Let’s look at the Misery Index as we moved sharply from 2019 to 2020 and into 2021. In September 2019, the Misery Index bottomed near an all-time low of 5.21%.

By March 2020, it had climbed slightly to 5.94%. But in April, due to the COVID-19 shutdown and corresponding high unemployment, the Misery Index shot up to 15.03% based on 14.7% unemployment and 0.33% inflation.  As political history has shown us, we can see a correlation in the 2020 election where the Misery Index played a significant role in the outcome.

Fast-forward to our current economic climate, and the (April 2021) Misery Index is at 10.26%.  To answer the economic hurt Americans are facing and help us recover from the pandemic, the Biden Administration is pressing forward with an unprecedented spending plan.  It is actually three plans rolled into one giant expenditure: The proposed $2.3 trillion American Jobs Plan (the infrastructure bill); the $1.9 trillion American Rescue Plan passed by Congress in March; and the $1.8 trillion American Families Plan proposed in April. Here is the breakdown.

American Jobs Plan

Unlike the Rescue Plan, which was passed by Congress relatively quickly, albeit without any Republican votes, the American Jobs Plan is still being debated by lawmakers. Many are concerned by the administration’s expansive definition of the word “infrastructure.” At $2.3 trillion, it is the largest of Biden’s three major proposals, and like the others, it divides that spending across dozens of initiatives. Some of the largest are:

> Funding for transportation, including roads, bridges, ports, mass transit systems, airports, and electric vehicle charging infrastructure. $621 billion
> Funding for home- and community-based care for the elderly and disabled. $400 billion
> Assistance for manufacturers and small businesses, including access to financing and clean energy investment. $300 billion
> Create, improve, and retrofit more than two million units of public housing. $213 billion
> Improved drinking water systems, power grids, and broadband internet access. $111 billion
> Workforce training and development. $100 billion
> Upgrading public schools. $100 billion

American Families Plan

The third of Biden’s major initiatives, the $1.8 trillion American Families Plan, is aimed at expanding education, improving access to childcare, and reducing child poverty. In addition to providing four additional years of guaranteed education (two years of preschool and two years of community college), it would extend programs put in place by the American Rescue Plan and substantially increase spending on childcare for working parents.

> Extend the refundable child tax credit from the American Rescue Plan through 2025. $400 billion
> Invest in affordable childcare facilities and training for caregivers. $225 billion
> Create a nationwide family and medical leave program. $225 billion
> Provide free universal pre-Kindergarten for three-and four-year-olds. $200 billion
> Extend Affordable Care Act tax credits created under the American Rescue Plan. $200 billion
> Make an expansion of the Earned Income Tax Credit to childless workers permanent. $125 billion
> Provide free tuition for two years of community college. $109 billion
> Increase Pell Grants for low-income college students. $80 billion
> Make additional child and dependent care tax credits from the American Rescue Plan permanent. $80 billion
> Invest in programs to encourage student retention at community colleges serving the most disadvantaged students. $62 billion
> Provide two years of tuition for students at colleges and universities serving Black, tribal, and other minority students. (Limited to families earning less than $125,000 annually.) $39 billion
> Expand free school meals to children in high-poverty areas. $17 billion

We know that Congress will modify some of those spending numbers in the coming months, but it is fairly certain with a Democratic-controlled House and slim majority in the Senate a compromise spending plan will emerge in the late summer or early fall.

Now, let’s add into the mix, the California Roaring Back funding plan that Governor Newsom launched last week with the May Revised Budget.  According to the executive summary, “The May Revision stands in stark contrast to the budget of one year ago. Compared to a projected budget deficit of $54 billion a year ago, the state now has a projected $75.7 billion surplus. Combined with over $25 billion in federal relief, this supports a $100 billion California Comeback Plan—a once-in-a-lifetime opportunity to not only speed the state’s recovery from the pandemic, but to address long-standing challenges and provide an opportunity for every California family—regardless of their income, race, or ZIP code.”  You can read the full May Revised Budget here:

http://www.ebudget.ca.gov/2021-22/pdf/Revised/BudgetSummary/FullBudgetSummary.pdf.

Similar to the Biden plan, Governor Newsom is tossing funds into every facet of California.

> Recovery funds with stimulus checks and business grants to small businesses
> $9 billion for housing programs, including directing federal funds from the American Rescue Plan
> $12 billion for homeless programs; additional funding for education
> $93.7 billion in Prop. 98 funding over the next three budget cycles
> $2.4 billion for wildfires
> $5.1 billon to address water supply state-wide
> $13.6 billion for criminal justice
> Additional funding for health care
> Infrastructure funding up to $7 billion for the “middle mile” of broadband, highway, bridges and roads

I think you get the storyline — when times are hard in an economic downfall, the government turns on the money machine using the taxes collected from high wage earners to fund existing and new programs. The hidden question is how the taxpayer turns up her/his own spending habits in a more flexible vaccinated environment?  That is the real stimulus which creates jobs and improves the local economy. The Misery Index today is nowhere what it was in the 1970s and we appear to be on a recovery trend regardless of the Biden Administration and Governor Newsom’s California Roars Back plan.  To paraphrase Senator Dirksen’s quote, “A Trillion Here, a Trillion There and now we have a Real Spending Plan.”

Source = Santa Cruz Chamber