Biden’s Bubbles: Froth and Folly Before the Crash.

By going all in on unlimited spending, Biden and the Democrats embrace pre-crisis thinking and cement a different role in history than they imagine.

President Joe Biden may just be primed to buck the midterm trend wherein the majority party hemorrhages seats by employing a different strategy than his more recent Democratic predecessors: he’s going to give away so much free stuff that you just can’t wait to vote for his party again in ’22. A cresting wave of Fed-induced, COVID-recovery spurred economic growth success may give the Democrats the midterm boost they need. In other words, Biden will ride those economic numbers and direct cash giveaways to expand on his exceptionally thin majority in Washington.

Yet, here we are, back to the days of old-school cash handouts unmoored from work requirements.

After decades of warnings from policymakers about Americans’ lack of personal savings, and news reports prominently featuring statistics about how close to financial insolvency many are (‘Millions of Americans are only $400 from Financial Hardship’ was a frequent headline), America’s fiscal expert class has changed course. It’s now cheering direct cash transfers to citizens that specifically fuel manic stock buying and cryptocurrency sprees. In 2021, we read front pages featuring an article on the long lines at food banks next to one about the surprising resiliency of Dogecoin.

The United States has crossed a remarkable rubicon, and without much remark. In the 1990s, a bipartisan consensus developed that America’s welfare system needed an overhaul, realized in the bipartisan passage and signature by Bill Clinton of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The centerpiece of the effort was the elimination of the Aid to Families with Dependent Children (AFDC) program, our major non-health-related family welfare mechanism at that time and considered by many to discourage work among recipients, with the Temporary Assistance for Needy Families (TANF) system. A major theme of the reforms was tying the receipt of aid to work status, an innovation largely hailed as a success, and that remained central to debates that followed in the decades since.

Yet, here we are, back to the days of old-school cash handouts unmoored from work requirements. The most immediate example of this isn’t even the stimulus checks; it’s a new monthly Universal Basic Income for families that’s been misleadingly labeled a tax credit. The Biden administration’s $1.9 trillion COVID-19 relief bill preempts the traditional end of year assessment of your income status followed by a potential tax credit for families who qualify, and instead instructs the IRS to rely on past tax years to begin doling out monthly amounts to families on a per-child basis. This money is disbursed regardless of work status and regardless of whether the family actually provides any net tax revenue to the federal government from which a credit would draw. As even the New York Times points out, this is a historic return to the days of welfare as we knew it. “Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries,” the Times writes. “Biden’s embrace of the subsidies is a leftward shift for a Democratic Party that made deep cuts in cash aid in the 1990s under the theme of ‘ending welfare.'”

That promise by Bill Clinton, to “end welfare as we know it,” was met with applause at the time, given the popularity of the sentiment. It also represented the power of the Reagan-led consensus on American attitudes towards government spending and the government’s role in its citizens’ lives. Now, at the burial of the Reagan/Clinton consensus, what we must keep in mind is just how reckless and shortsighted all of this is. America rolls into the Twenties with unsustainable debt, a stock market disconnected from underlying economic conditions, and bubbles that rise and fall rapidly with ripple effects we cannot fully understand. This tells us one thing above all others: these are pre-crisis, pre-crash times. Hubris is widespread; we are prideful, and so we’ll fall.

Stock market.

Stock market.


President Biden and his team of Beltway veterans are flooding the zone with proposals, each dutifully chased by an easily manipulated media, and Republicans can barely muster to oppose an idea before the next receives its own glowing press treatment. From a capital gains tax increase, to immigration reform via reconciliation, to climate change regulations, to childcare center funding, to post-Stimulus further Medicaid expansion, and back to climate change, Democrats are smartly floating trial balloons in a rapidly rotating order before they can be punctured, maintaining both momentum and control of the debate. Even the short-term branding failure on the word “infrastructure” in the past few weeks won’t deter them; the major proposals therein will become law whether as part of one big package or rolled into other legislation. Now, on top of our already unsustainable debt, a new and massive entitlement program is being dangerously floated by the Democrats: free college—though they’ve branded it “student debt cancellation,” which polls well and obscures the reality from a nation that consistently rewards fantasy.

[T]he federal government—essentially now our primary consumer lender—is encouraging risky borrowing once again…

Assuming a cancellation of student loan debt of up to $10,000 for current debtors, it’s not hard to imagine the temptation will mount for larger sums and broader forgiveness terms. In fact, Democrats already say that President Biden’s preferred steps are not enough, calling for the cancellation of up to $50,000 in debt per borrower in what would be one of the largest transfers of wealth in American history. Further, while small groups of activist students deliberately stopped repaying their debt well before the CARES Act abeyance granted temporary relief, many other students are making financial decisions based on anticipated forgiveness or are unclear on what they’ll end up owing and when. What remains even less clear is how to treat the next generation of borrowers, who would have just seen their predecessors receive loan forgiveness, or how to prevent borrowing from escalating rapidly into another mountain of debt as a precedent is set for loan cancellation.

Stock market.

Stock market.

What even the borrowers who would stand to benefit may not realize is that, while the money may be removed from their personal balance sheet, they are still going to be repaying some of it in the form of higher taxes or diminished economic growth as America adds their debt to the public balance sheet. The transformation of colleges into federal appendages, one that began with Obama’s federalization of student loans, will come into sharper relief under the Biden administration—not dissimilar in degree of change to Medicaid’s journey from last resort to the largest health insurer in the nation.

The towering inferno that is student loan debt currently threatens to be an early domino in the next market crash, but the plan to “cancel” it simply folds that debt onto the public credit card bill and speeds us towards national default. Just like the government-pursued housing policies that encouraged unwise home lending practices such as subprime borrowing, the federal government—essentially now our primary consumer lender—is encouraging risky borrowing once again, this time cheered on by upper-middle-class former students who have no compunction passing their burdens onto others.


The experts, who we’re told can these days better manage, even shorten, economic crises when they do occur, man the very institutions now creating the conditions that will lead to those crises. And they are making the very mistakes we’ll look back on, accumulating blind spots along the way that will be featured in helpful explainer videos after the crash.

When reality asserts itself, the consequences are often painful and much further reaching than anticipated.

That unearned confidence now applies to a Federal Reserve tasking itself with considering racialized policies and climate change for the first time in our nation’s history, creating additional uncertainty as to what economic health (as they define) it will look like. While President Biden has yet to act on his campaign promise to change the historic mandate of the Fed, the organization has declared it will consider maximum employment not a directly measurable number but a “broad-based and inclusive goal,” one that takes into account the economic experiences of different races when making national economic decisions such as setting the interest rate.

What the Fed has been up to the past few years is not just the traditional tactic of keeping interest rates low to stimulate economic activity, while accepting some inflationary risk. Instead, the Fed sent signals that essentially said they could backstop the entire market: it authorized the direct purchase of corporate bonds, and one Fed chair prominently commented that “there is an infinite amount of cash in the Federal Reserve.” While these moves calmed jitters in the heart of the pandemic, they also added froth to the market by obscuring the real value of companies and assets. Further, by keeping interest rates low, the Fed enabled our elected officials to keep borrowing, resulting in the obscene spectacle of our government directly funding the stock purchases of citizens via handouts that too often went not to groceries or diapers, but Gamestop and Bitcoin.

The explicit intent of the Fed’s policy here is to reward investment and risk-taking and punish savers as a means to get the economy going again, but in doing so, they are fueling the bubbles that will burst next. The downside to this activity may arrive in one of two different ways. The first is the risk of liquidity-fueled asset bubbles popping and causing a broader crisis. Put more simply, when so much money flows into the economy, asset bubbles tend to form, with the prices for a particular commodity fluctuating wildly and often rising divorced from the inherent value of the object. When reality asserts itself, the consequences are often painful and much further reaching than anticipated. The 2008 financial crisis was a prime example.

The second type of risk is found in the inherent vulnerability of multiplying latency in a market where risk-takers face little actual risk: when enough individual bad decisions face little or no consequence, those bad decisions get repeated and even doubled down on. Those bad decisions might be made by one investor, one company, or even by a whole industry or sector. When a reality check comes due in the form of harsher economic conditions or higher interest rates, things can again get ugly fast. And while the Fed can create all the liquidity they want to try and spend our way out of those situations, it would likely just be repeating the cycle we’re in now.

As it relates to the epochal borrowing we’ve embraced, we will not grow our way out of painful future choices, not through the unlimited spending Democrats want and the Fed enables, nor through the combination of hoped-for future GDP growth and cuts to spending that Republicans favor.

Capitol Hill.

Capitol Hill.


That a new religion of economic egalitarianism now guides a majority of federal spending is becoming ever more plain. The return of AFDC-like policies and direct cash transfers, divorced in any concrete way from qualifying constraints or measurement of real need, promises to take the country down a path of debt it will not easily emerge from. These choices will echo loudly. President Biden likes to compare himself to FDR, but what his hubris won’t allow him to see is that his is a pre-crisis presidency. The Biden administration is feeding the bubbles that will burst, painfully and with consequence, later.

President Biden likes to compare himself to FDR, but what his hubris won’t allow him to see is that his is a pre-crisis presidency.

Even in his provably popular role as Gift-Giver in Chief—and even if President Biden fully abandons his campaign’s pretense of centrism and promise of bipartisan dealmaking in pursuit of progressive glory, before the statues of him are commissioned, the bills will come due. And before those statues are built, it will become clearer to all that the rich got richer, the struggling still struggle, and alienation flourished. The elite of the Left will have done just enough to congratulate themselves on paying the toll to remain comfortable on their way to speeches at investment banks, on making their affluence palatable. But, if you think you can achieve your version of social justice through the federal government, you don’t understand how power works. For the nation, there are harder times ahead; the math now guarantees it.

Written By:

Jason Killmeyer is a Pittsburgh-based writer with a decade-plus background in federal consulting that afforded him a keen understanding of just how hard effective public policy implementation is. Let him know what you think @JasonKillmeyer on Twitter.