Stockman: Free Lunches For All?
In light of Sleepy Joe’s new $1.9 trillion package of free stuff, it’s time to get out our magnifying glasses. The purpose is to compute the size of the hole in America’s collective paycheck that purportedly requires such continued, beneficence from our not-so-rich Uncle Sam.
There is no reason in the world why the February (pre-Covid) level of wage and salary disbursements is not an appropriate benchmark for measuring the pocketbook hit from the Covid-lockdowns that have wreaked havoc on the US economy since March. This happened after Dr. Fauci convinced President Donald to pull the plug on MAGA and his own tenure in office, too. (Of course, 80-year-old Dr. Fauci is still there, preparing to bamboozle yet another “elected” president.)
Last February, The Donald was boasting that he had delivered the greatest economy the world had ever seen, and Wall Street agreed, pushing stocks high into the nosebleed section of history.
As it happened, the February run rate (annualized) of wage and salary disbursements was $9.659 trillion, which comes to about $805 billion per month. So we would suggest that if $805 billion in monthly wages was enough to justify celebration of the Greatest Economy Ever, then the shortfall from that benchmark is a solid measure of the hit to US worker earnings that has occurred since February.
The Covid wage and salary loss is as follows:
December est: $0b;
10-month total: –$276b
The total of $276 billion in lost paychecks compares to $8.05 trillion in wages and salaries that would have been earned during that period at the February rate ($805 billion). Therefore, the cumulative shortfall through year-end amounted to just 3.4%.
More importantly, the $0-$6 billion monthly shortfall since September has been so small as to constitute a rounding error in the scheme of things, as suggested by the fact that American households spend far more—about $8 billion per month—on pet food and pet care alone.
Yet Sleepy Joe has teed up another $850 billion of direct aid to households, which, in the aggregate, are no longer suffering any material paycheck shortfall. And what is especially egregious about filling a nonexistent income hole in this manner is that 53% of this amount goes to “stimmy” checks and child tax credits, which are not means-tested except at the top of the income scale ($200,000 for a married couple):
Sleepy Joe’s $850 Billion of Direct Handouts to Households:
Stimmy checks and child tax credits: $450b;
Unemployment benefits: $200b;
Health insurance aid: $100b;
Rental assistance: $35b;
Child care aid: $40b
Safety net: $20b
Still, to paraphrase Walter Mondale’s famous campaign slogan from 1984: Another $850 billion for income replacement but “Where’s the Hole?”
Of course, there are other ways to measure the hit to the national economy from the Covid lockdown, which we will amplify below. But first, it would be well to summarize the “solution” that Washington’s fiscally incontinent politicians have thrown at the “problem” during the last 12 months—a “problem” that they have never bothered to quantify.
With the new Biden package, new spending authorized by the five major Covid relief measures can be summarized as follows (IN billions):
Families First act: $192b;
CARES act: $2,200b;
Paycheck Protection program: $733b;
Response and Relief Act: $935b;
Biden Jan. 14th plan: $1,900b;
Five-package total: $5,960b.
The Washington politicians are preparing to throw nigh onto $6 trillion at a $274 billion hole in the nation’s wage bucket. That’s a solution 22X bigger than the putative problem!
The overwhelming share of the economic harm occurring since March is due to the misguided (and unconstitutional) lockdown policies of the government and the public hysteria fanned by Dr. Fauci, and not the disease itself. But if the state gets into the business of fully compensating the public for the endless harm wrought by its policies, insolvency will be guaranteed.
Why does Washington have the right to burden future taxpayers with permanent debt service payments in order to make whole a $276 billion loss of income and 3.4% inconvenience among taxpayers today?
The simple fact is that the overwhelming share of this $276 billion of wage losses has fallen on low-wage and part-time workers in the social–congregation sectors of the economy (bars, restaurants, gyms, hotels, cinemas, ballparks, etc.) that the Virus Patrol has shut down. The right solution is to send the Virus Patrol packing and let these unfairly penalized employees go back to work.
Even if you think that the total wage and salary loss above understates the economic damage caused by the lockdowns, the massive fiscal overkill by way of bailouts cannot be denied.
For instance, GDP is the most comprehensive measure of economic activity that we have (despite its flaws), but the loss of GDP after February has also been only about 3.6%. In fact, based on the Atlanta Fed’s GDPNow forecast, we project that nominal GDP during Q4 will post at about $21.650 trillion, a figure only 0.46% below the Greatest Economy Ever level of Q4 2019.
If we assume that Q4 2019 is a reasonable pre-Covid benchmark for the level of total economic activity in the USA, we get the following shortfall, including an estimate for Q4 based on the Atlanta Fed’s latest outlook.
Quarterly GDP Change From Q42019 Benchmark:
Q1 2020: -$47b;
Q2 2020: -$557b;
Q3 2020: -$144b;
Q4 2020E: -$25b;
4-quarter total: -$775b
Even if you want to count everything, including losses from the $2.5 trillion of imputed activity in the GDP, the pending $6 trillion of Everything Bailouts is 7.7X the size of the problem!
By contrast, it is well worth looking at the other side of the coin: namely, the surge in transfer payments since last February stemming from a combination of the built-in safety net (principally unemployment insurance, food stamps and Medicaid) and disbursements of stimmy checks, enhanced Federal UI benefits as authorized by the Everything Bailouts.
At the pre-covid level in February, total government transfer payments (including state and local) were running at a $3.165 trillion annual rate or about $265 billion per month. As shown in the chart below, however, that monthly figure skyrocketed by 107% to $546 billion in the month of April alone.
And, no, that latter figure is not the annualized rate: In their infinite generosity, government programs pumped more than one-half trillion dollars into the household sector during April alone. That’s $18.2 billion per day!
Thereafter, the tsunami of transfer payments began to abate but was still running at a level of $400 billion monthly in July and $306 billion in November. Overall, the 10-month total of incremental transfer payments above the February level totaled $1.05 trillion.
You can’t make this up… Transfer payments to households during the past 10 months have exceeded the loss of household wages and salaries ($276 billion) by nearly four times.
So the question recurs: Why does Sleepy Joe think we need another $850 billion of transfer payments to households on top of the immense generosity already dispensed per the chart below?
Total Government Transfer Payments, Annualized
He’s doing it because he can—because the nation-wreckers in the Eccles Building have determined to purchase $120 billion of government debt and GSE securities per month for the indefinite future. As Fed Chair Powell rattled on recently, they are not even thinking about tapering this tsunami of fake money created from thin air by the Fed’s digital printing presses.
When it comes to the rampant fiscal incontinence in Washington DC enabled by the Fed, did the election outcome make any difference?
It did not. Sleepy Joe is about to give the once and former King of Debt a run for his money when it comes to the annals of fiscal infamy in America.
As we said, free lunches for one and all… except the debt is never going away, and future generations will surely rue the day.
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Sun, 03/14/2021 – 17:20