The latest surveys show most Americans who are eligible to receive the new $1,400 stimulus checks included in President Biden’s latest $1.9 stimulus plan are in favor of the upcoming government payments. I guess that shouldn’t be a big surprise.
What you may not know is with the passage of this nearly $2 trillion stimulus plan, total spending earmarked for COVID-19 relief now comes to around $6 trillion – which comes out to roughly $41,870 in federal spending per federal taxpayer – according to the non-profit Foundation For Economic Education (FEE). Let that soak in for a moment.
Put differently, in lieu of spending $6 trillion on COVID, the government could have written a check for roughly $20,000 to every American adult – regardless of whether they pay federal taxes or not. This $20,000 payment to every adult American is mind-boggling!
These spending projections from FEE (you can read the report in SPECIAL ARTICLES below) might be slightly overestimated because we now know that much of Biden’s latest $1.9 trillion stimulus will not be spent to fight COVID-19 or to produce vaccines; instead, it will be spent on politicians’ pet projects and pork barrel spending. Yet even so, FEE’s spending numbers are not overestimated by much, if at all.
Biden Could Have Given Us All $20,000+ Instead of Stimulus
As noted above, President Biden signed into law the largest one-time stimulus bill in U.S. history – at $1.9 trillion, which was marketed as a COVID-19 relief plan. The problem is, as we now know, only about 10% or less of that stimulus will go toward COVID-19 spending. The rest will go toward a laundry list of pork barrel spending.
I was well aware the government has spent trillions to fight the COVID-19 virus over the last year. What I didn’t realize until I read FEE’s spending per person estimates last week is the number now adds up to around $20,000 each for ALL adult Americans. Imagine the economic boost which would result if every adult American received $20,000 instead of the watered-down stimulus relief.
Americans should be hopping mad about this! If the government is going to give away nearly $2 trillion in one fell swoop, eligible Americans should be outraged they will only get a $1,400 COVID check. But the Biden administration was careful to package this latest boondoggle as something very different, COVID-19, when in reality it is mostly just a laundry list of liberal spending priorities.
Moreover, the COVID spending bills have all lost huge sums of money to other unrelated carve-outs (politicians’ pet projects), corporate bailouts, fraud and waste. You can look it up.
In the latest $1.9 trillion package, more than 90% of the spending is not directly related to containing COVID-19. It gets even worse: Only about $15 to $20 billion, 1% of the $1.9 trillion is to be spent on COVID vaccines.
Meanwhile, hundreds of billions go to bailing out poorly managed state governments’ budget deficits that predate the pandemic and $86 billion in rescues for failing pension plans. Meanwhile, billions more go to Obamacare expansion and subsidizing public schools long after the pandemic. Much of this is a bad use of taxpayer money, but the politicians don’t care.
Perspective: The Math Doesn’t Add Up – We Were Cheated
If you add up all the COVID related spending, the numbers here really are quite damning. As noted above, for the same $6 trillion in expenditures, the government could have given every federal taxpayer a $41,870 check. Or, thinking bigger picture, it could have written every adult American a check for over $20,000.
Let’s compare this to what most Americans actually received. Only someone who fully collected the expanded unemployment benefits throughout the pandemic and received all $3,200 in total of the stimulus payments ($1,200, $600 and now $1,400), likely received more than $18,000 in direct benefit from the COVID-19 spending packages. And that’s a tiny fraction of the overall government spending.
Because of the way the government used outdated (and arbitrary) income data to determine eligibility, many more taxpayers saw nothing or little in exchange for their $41,870 share of the cost, perhaps just the initial $1,200 stimulus or none at all. And let’s not forget that over a billion dollars in checks went to dead people.
The bottom line is: For almost all Americans, the actual benefits of the multiple pieces of COVID stimulus legislation come in far, far below the figure they would have received if the entire pile of money was just evenly split up and paid out to adult Americans.
How can that possibly be considered a success? In fact, it’s actually a travesty! And both Democrats and Republicans should be held accountable. But sadly, most Americans have no idea what has happened over the last year or so. (I had better stop now.)
Americans Are Sitting on a Record Pile of Cash – Now What?
As I have pointed out often, most economists are convinced the U.S. economy is going to experience a huge boost on the upside once we get the COVID-19 pandemic under control. I tend to agree, although the boom may not be as large as most forecasters predict. We’ll just have to see.
But the fact is, many Americans are sitting on more savings today than they’ve had in years. Because of the pandemic and economic lockdowns last year, and to a lesser extent this year, Americans in general are sitting on more savings than ever before – estimated in the trillions.
Because so many people were stuck at home much of last year, and because so many businesses were closed, Americans saved more money than ever. The personal savings rate skyrocketed to 34% of after-tax income last year, the highest level since records have been kept – as people feared for their jobs and sharply cut back spending.
The savings rate was still 20.5% in January, which is nearly triple the pre-pandemic savings rate of 7.6% in January 2020. Now, with the expected $1,400 stimulus payments about to hit, most forecasters are predicting an even larger economic boom later this year, assuming we get COVID under control – which is still a big assumption.
Whether it happens or not remains to be seen, but the fact is many Americans are sitting on a LOT of cash, and they are very likely to spend some of it as soon as they are confident we’ve gotten COVID reasonably under control. This could be a big boon to the economy later this year or next, or both.
Since President Biden signed his massive nearly $2 trillion spending plan into law last week, I have seen several articles advising people how to invest in light of this largest government spending spree since the end of the Great Depression.
It’s as if these pundits think you shift your investing habits and goals willy-nilly based on the latest political shenanigans in Washington. Maybe some do, I suppose, but I’m sure glad my clients don’t think that way! I’m so blessed to have you all as clients and readers! I’ll leave it there for now.
Gary D. Halbert is the president and chairman of Halbert Wealth Management, Inc. His Forecasts & Trends Weekly E-Letter may be obtained free of charge by subscribing at www.halbertwealth.com.