By Emel Akan
SALT LAKE CITY—Excessive government spending and mounting national debt will likely trigger a financial crisis in the next 18 months, economist Stephen Moore warned on July 28.
“It’s a very precarious time economically for the country,” Moore told The Epoch Times during the annual meeting of the American Legislative Exchange Council (ALEC) in Salt Lake City.
“There is a debt hangover coming. And if we stay on this path that the Biden administration wants us on, I believe there will be another financial crisis.”
His comments came after a group of bipartisan senators and the White House announced a deal on an infrastructure package with $550 billion in new federal spending. Soon after the announcement, the Senate voted 67–32 to begin debate on the measure, with 17 Republicans joining Democrats.
Many conservatives including Moore believe that vote for the bipartisan infrastructure bill is a de facto vote for President Joe Biden’s larger $3.5 trillion social package that calls for tax increases and higher spending on education, child care, climate change, and Medicare expansion.
“I think sometime in the next 18 months, there will be a big correction,” Moore said.
Besides growing debt, “massive misallocation of resources” is causing trouble, he says, citing generous federal benefits that disincentivize work as an example.
Many business owners across the country have been complaining that they can’t compete with the benefits offered by the federal government. The supplemental unemployment benefit introduced during the pandemic is seen as one of the factors that have contributed to the severe labor shortage in the country.
These programs, Moore said, are contrary to the welfare reform of the mid-1990s that required welfare recipients to work in order to receive benefits.
While Democrats continue to call for more spending, more than $1 trillion of federal COVID-19 relief aid approved by Congress remains unspent, according to a report by the Government Accountability Office published last week.
“Why don’t we take those trillion dollars,” Moore asked, “and use that for roads and highways and not appropriate another trillion on top of what we’ve already borrowed?”
Moore also said that inflation is accelerating because of Biden’s and the Federal Reserve’s policies.
“We’re putting a lot of hopes and prayers on this idea that inflation is going to go away. But if we pass another $4 trillion spending bill, I guarantee you inflation is going to go up.”
Moore also reacted to the federal government’s mask mandates. On July 27, the Centers for Disease Control and Prevention (CDC) stated that it would recommend masks for high-transmission areas for both vaccinated and unvaccinated people.
Moore said that investors and business owners are worried about new rounds of lockdowns.
“I think a lot of people are confused about where this is all headed. And from an economic perspective, it could really slam the brakes on this recovery,” he said.
Thousands of state and local leaders from both sides of the aisle gathered at this year’s ALEC summit to discuss major state policy issues.
Moore, who worked as Trump’s campaign adviser in 2016, is co-author of the ALEC publication “Rich States, Poor States” that ranks states based on their economic competitiveness each year.
In a tweet on July 28, Biden touted his infrastructure deal, calling it “the largest infrastructure bill in a century.”
“We’ve reached a historic deal on infrastructure, folks,” Biden wrote. “It will grow the economy, create good-paying jobs, and set America on a path to win the future.”
In a report published on July 21, Moody’s Chief Economist Mark Zandi forecasts that Biden’s proposed policies, including a $3.5 trillion reconciliation bill to support a range of social investments, will boost long-term economic growth and create 14.4 million more jobs during his term.
“Worries that the plan will ignite undesirably high inflation and an overheating economy are overdone,” Zandi wrote in the report.
Senate Majority Leader Chuck Schumer (D-N.Y.) praised Zandi’s analysis and urged lawmakers to read the report.
“The report by Moody’s should light a fire under all of us,” Schumer said on the Senate floor last week.
Many prominent economists, including President Bill Clinton’s Treasury Secretary Larry Summers, have strongly criticized excessive stimulus packages, raising concerns about the risks of overheating the economy and creating harmful inflation. Economists are also concerned that the U.S. central bank could end up waiting too long before hitting the brakes to contain inflation.