Biden Stimulus

These are a few thoughts on the topic since I haven’t had time to read the bill or even summaries of what is in it (working). I’ll be the first to admit that I thought the economic consequences of covid restrictions would be far worse than they have been, although during the time when I thought this it appeared serious restrictions were going to remain in place longer than they did. At the same time, in April of 2020 I wrote that the democrats would use the covid to reward their donors once elected and that is exactly what they are doing. Not to mention all the benefits to industry, essential retailers, and especially pharmacutical companies who have manufactured vaccines and find themselves in a position where they can make enough to satisfy the demand.

Unemployment is 6.5%, and they’re spending about 500 billion on direct payments to the public when at least half of those who are eligible for payments do not need them. If you have a house hold income of greater than 70k per year you do not need $1400. I am for providing the public with money, but not a small sum that isn’t going to significantly improve the opportunities of the most disadvantaged, which is the bottom 50% of income earners. Many people in this income percentile do not have the means to increase their opportunities for income. They are stuck between their expenses and an income that barely meets those expenses.

As I’ve written elsewhere the 1st issues is the inflationary effect of increasing the money supply without changing the proportion of money held. By this I mean if 90% of the population is given $1400 dollars most of what you’ve done is changed the ratio of money to goods and services. Whereas if the bottom 50% or bottom 40% receive money then half the population has gained access to the market in ways in which they hadn’t before, but the top 50% hasn’t gained so it isn’t simply a change in the amount of money the public has compared to the goods and services being sold. There will be greater inflation than there would have been under a balance stimulus or without a stimulus.

Biden’s stimulus will provide payments to about 80% of American’s, couples with a household income of 160k or less, single parents with an income of 120k or less, and individual’s with an income of 80k or less. As if those who are making 120k, $10,000 per month, are going to be significantly better off having received $1400. (1) Spending borrowed money (treasury bonds) to give money to people who do not need it, while those who need it go without it.

1: This started off as my initial thoughts on Biden’s stimulus but I read a headline that eligibility had been lowered. I read the article that supplies the Senate proposed criteria. New York Times, “Narrower Income Limits for Stimulus Checks Win Biden’s Approval”, https://www.nytimes.com/live/2021/03/03/us/joe-biden-news.

It isn’t immediate, but in the next few years prices will increase faster than income will increase and people will pay that $1400 back with a great deal of interest. More importantly, $1400 is not a sum that significantly improves a person’s ability to increase their income opportunities.

What it is is bribing the public to accept a greater degree of corporate welfare. Look $1400, 500 billion dollars out of 2 trillion being spent, not to mention the 4 trillion dollar annual budget that is always loaded with industry incentives.

With that same 2 trillion dollars, the bottom 50% of income earners could be provided the following: the bottom 20% $30,000, the next 10% $20,000, and the next 20% $10,000. This is a sum great enough to allow people to increase their income opportunities, starting small businesses, transportation, education, repairing credit, among other income enhancing opportunities. Instead they’re pissing away this money to renumerate the business interests they represent, giving the public (many of whom do not need it) peanuts and harming the poor in the long term as the price of goods and services increases faster than their income will increase.

To put the stimulus into perspective, and the 3.5 trillion during the Trump adminstration, the GDP of the United States, the total amount in dollars of goods and services purchased in the United States in 2019 prior to the for profit exaggeration and exploitation of covid-19, was roughly 20 trillion dollars. A 2 trillion dollar stimulus represents almost 10% of GDP, as the money enters the market through investment, savings (through loans and investment), and consumption. If the fiscal year begins in April and the third stimulus passes as it probably will, after everyone in the Senate has had an opporutnity to stuff something into it, that will be 5.5 trillion dollars spent, representing more than 25% of GDP from 2019. You don’t increase the money supply by that much among most consumers without it upsetting the ratio of money relative to goods and services, which means money becomes worth less.

If in 5 years $100 would have bought $90 worth of goods and services, and because of the stimulus $100 only buys $85 or less, considering that the average annual household spending is about $65,000, in a year the average consumer has lost 3250. For the average consumer that is fine even if not beneficial, but for the poor whose income opportunities supply substantially less purchasing power, they are more trapped then than they are today.

For more on the balance stimulus click here