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What would Sen. Everett McKinley Dirksen say if he were alive today? Considering the size, scope and costs of the Biden administration’s spending plans, we can surely imagine.
Dirksen, of course, was the colorful Republican from Illinois credited with the famous and apocryphal “a billion here, a billion there, and pretty soon you’re talking about real money” quote.
“A newspaper fella misquoted me once,” said Dirksen, “and I thought it sounded so good that I never bothered to deny it.”
What Dirksen witnessed during his Congressional career — including his service in the New Deal-era House of Representatives from 1933 until 1949 and in the Senate from 1951 until 1969 — pales in comparison to what Washington is talking about now.
Consider this: Less than two weeks after President Biden signed a broad-based $1.9 trillion stimulus bill, The New York Times reported another round of big-bucks legislation is planned. Like, $3 trillion big.
Among the components on the table in the Biden “Build Back Better Recovery Plan” are a trillion dollars in spending on infrastructure like bridges, roads, rail lines, ports, 5G networks and more.
Additional funding for free community college, pre-kindergarten expansion and paid leave programs are also in the mix.
Clean energy and climate change initiatives? Job-training programs? Money to fund construction of up to a million less expensive, yet energy-efficient, housing units? Check, check and check.
The plan is so huge, in fact, that the administration may have to break it up into smaller, more easily digestible pieces for an increasingly skeptical Congress.
There are no jovial, Dirksenian characters out there these days willing to partner up with an opposition-party chief executive for guns and butter.
And, depending on how associated costs are accounted, the ultimate price tag for this domestic-only program could actually close in on $4 trillion.
The administration is hoping to offset at least some of the costs through various revenue-raising moves. An increase in corporate taxes is one option on the table. Hiking taxes on high-income Americans is another.
But they won’t come anywhere close to offsetting all of it. And we all know what that means: even bigger budget deficits piling up, and even more government debt being sold to fund them.
February’s budget deficit alone came to $311 billion — a record for the month. The Congressional Budget Office (CBO) also recently hiked its full-year fiscal 2021 deficit forecast to $2.3 trillion.
And that was before the $1.9 trillion stimulus plan passed.
Add those costs to the tally, mix in a couple trillion more in spending, throw in an overseas crisis — even the voluble Dirksen would be held speechless.
It’s a “money flood” unlike anything in our nation’s long and storied history.
I’ve shared what this mega shift means for investors many times. My recommended approach boils down to another famous Washington expression: “Follow the money.”
Here’s what that means:
• Buy sectors, stocks and assets that benefit from Washington’s extraordinary largesse. I’ve written about a few of them here, here and here.
• Sell sectors, stocks and assets that suffer from them. My most recent Safe Money issues go into them in depth.
Remember, the long-term consequences of all this spending are growing … fast.
It’s up to you to decide how to respond.
Until next time,
Mike Larson
