In a blog post about the deficit, economist Paul Winfree of the Economic Policy Innovation Center notes a troubling fact about Joe Biden’s much-praised boom in manufacturing construction: “Private fixed investment has fallen by 1.3 percent as manufacturing construction has increased by 55 percent since the enactment of the American Rescue Plan Act.”

That suggests the increase in manufacturing construction is entirely driven by government subsidies and is not serving a market need. The cost of those subsidies is part of the reason the budget deficit has been so large the past two years, which in turn contributes to inflation and to higher interest rates.

Not only is the increase in manufacturing construction not driven by the market for investment, it is also not driven by the labor market. The overall unemployment rate is below 4 percent. The unemployment rate in the manufacturing sector is below 3 percent. Winfree notes that the slack in the labor market is at the same level it was before the Covid pandemic, which was historically low.

So the government is financing the construction of new manufacturing facilities for political purposes in an economy where private investors aren’t putting up their own money to do so and there aren’t a bunch of workers waiting to fill them. When politicians’ fetish for manufacturing was mostly rhetorical, it didn’t make any more sense than it does today, but it was largely harmless. Now that they’ve put billions of taxpayer dollars behind the rhetoric, there’s risk of a bubble that could do some damage when it pops.