The COVID-19 pandemic has impacted the U.S. economy is new and unprecedented ways. Over the course of several weeks, millions lost their jobs as businesses began to close across the country. Unemployment rates skyrocketed, reaching 25% at some points. Filings for unemployment relief shot up just as quickly. As this disease-induced economic catastrophe was unfolding before the nation’s eyes, pressure began to mount on Congress to pass some sort of relief bill.
This economic relief came in the form of the CARES Act, which was passed on March 27, 2020. The bill totaled 2.2. Trillion and included $1,200 checks sent out to individuals across the nation, with an extra $500 included for each dependent filed on the recipient’s taxes. The bill also included $260 billion in unemployment relief, $350 billion set aside for small business loans, and $339 billion to local and state governments.
This was not to be the only stimulus package, however. Another $900 billion stimulus package was passed in December 2020, with checks of $600 sent out to Americans. In March of 2021, the Democratic-led Congress passed a third stimulus package, totaling $1.9 trillion, with $1,400 checks being sent out.
For those of you keeping score at home, the total amount that Congress has spent on stimulus bills (assuming yet another stimulus bill isn’t passed!) comes to a jaw-dropping $5 trillion dollars. The human mind has difficulty conceiving of such astronomically large numbers, so a few illustrations to provide some point of reference:
- With a total of $5 trillion, Congress could have given everyone in the world approximately $651.55.
- With $5 trillion, Congress spent enough money on COVID relief to buy every single U.S. citizen nineteen brand new iPhones 12s.
- The odds of winning the lottery are 1 in 302.5 million. Assuming a $1 cost per ticket, this means that Congress could have won the lottery 16,528 times.
- The total cost of everything on the shelves in a large store like Walmart is roughly $6 million. Walmart has only 4,756 stores in the U.S. Therefore, with the $5 trillion spent by Congress, they could have bought everything on the shelves in every single Walmart store 175 times.
While the unfathomable level spending from Congress in response to COVID is concerning enough, it is only part of a much more concerning trend. During the 2008 recession, Congress only approved roughly $440 billion for TARP (Troubled Asset Relief Program) to help ameliorate the consequences from the subprime mortgage crisis. A quick computation tells us that Congress spent 11.34 times more in response to COVID than the 2008 crash.
Why was there such a massive increase in spending from the crisis in 2008 to the crisis in 2020? It is true that the economic crisis caused by COVID was unlike any other that we have experienced in recent memory. Many people were put out of jobs with little hope of securing new employment. As a result, stimulus checks were sent out to the majority of American households. However, stimulus checks were only a small fraction of the $5 trillion piggy bank that Congress decided to break.
One has only to read through the bills themselves to find plenty of handouts and subsidies to every program, organization, and pet project under the sun. For instance, the latest stimulus package included a $1 billion provision for “Racial Justice” for farmers. It also included $10 million for Native American Language Translation. It also included a $1.5 million grant for a bridge the Seaway International Bridge.
In the second stimulus package, a $10 million provision was made for gender programs in Pakistan. $40 million was allocated to the John F. Kennedy Center for the Performing Arts, which has been closed since the pandemic began. There was plenty of money set aside for foreign countries as well: Cambodia received $86 million, Nepal received $130 million, and Burma received $135 million.
Now, this is not to say that COVID relief should not have been sent from the government. Even as a Libertarian, if the government is going to forcibly prevent you from working, the least they can do is help bill your bills. However, these COVID relief packages were not primarily about COVID relief at all. These bills were a call out to every lobbyist, crony businessman, and corrupt politician that lots of spending was about to happen, and all they needed to do get in on the action was fit their provision into the bill. These economic leaches are drawn to government spending like moths to a flame.
The reason for the copious amounts of pork in these bills should be attributed to an increase in greed from lobbyists or politicians. The reason is much simpler: government was ready to spend. It had to spend on something, and there were plenty of cronyists in Washington with ideas of where that money could go. Rather, the answer for why there was such huge increases in government spending is because the American population is increasingly accepting the idea that government should be the primary source of help in an economic crisis.
The paradigm of government assistance in times of economic distress was accepted by many in the wake of 2008. Even Republicans, who claim the banner of small government and fiscal responsibility, were mildly favorable to the idea of TARP. After all, it was Bush that passed the bill. However, in 2020, this new “stimulus paradigm”, which had been applied to the banking sector first in 2008, was not fully embraced and applied to the economy as a whole. Government was here to help, and there was no bottom to its wallet.
As a result, checks went out to the vast majority of American families, bailouts were passed for Wall Street, loans given to businesses, and plenty left over for whatever pork Washington D.C. could come up with. For every occupation and class in society, there was government money to be had. Everyone had a check in the mail from Uncle Sam. Whereas 2008 saw bailouts for Wall Street, 2020 saw bailouts for everyone.
Again, it should be noted that the COVID Pandemic was a very unique economic situation that prompted a unique governmental response. However, when government acquires new authority and power, even if only temporarily, it never truly relinquishes it. The history of the United States is a continual testament to that fact. The new measures taken to alleviate the economic consequences of COVID-19 will undoubtably be used in some way during the next economic crisis. It is not an impossibility that during the next recession we see the government send out stimulus checks to American families. The massive stimulus packages will likely make an encore appearance as well. The acceptance of the stimulus paradigm will continue into each succeeding crisis until it is fully and wholly embraced by all.
Even more concerning is the notion that these proposals used in an attempt to revive the economy might be employed when the economy is alive and well. We have seen glimpses of this in the Federal Reserve’s interest rate policy. In response to 2008, interest rates were put on the floor. They stayed there for years, until they started to rise in the mid-2010s. Their rise was short-lived, however, as they only reached around 2% before the Fed started to hold rates steady and even decrease them in 2019–2020. Rates were once again lowered to the floor in 2020, and they are looking to say there for the foreseeable future. We are left to wonder, when will interest rates rise to anything resembling a normal rate?
The trend towards government assistance in economic matters has not limited itself to just economic crises. If government can help during times of need, why not also assist in times of plenty? This trend has been present during times of strong economic health as well. Single-payer healthcare, often sold under the guise of “Medicare for All”, is becoming increasingly popular year over year. Universal Basic Income, a final evolution of welfare systems, has been tried in several counties and cities already. Other progressive proposals, such as tuition-free college, that were once unthinkable, are now being discussed in American politics. Especially in Millennials and Generation Z, heavy government involvement in economic matters is no longer a radical idea. The stimulus paradigm will continue to march on in these social programs just as it has in emergency programs.
As the American population continues to embrace big government in their economic lives, the nature of the American economy will continue to be transformed. As spending continues to increase, more welfare-state proposals are enacted, economic measures usually reserved for crises are normalized, more pet projects are funded, and bailouts continue, we will eventually find ourselves in a strange new world. In this new world, the American economy is being run increasingly through the Federal government. People rely on Washington for paychecks, business relies on it for revenues, and the cronyism continues to spread. Many institutions and programs, such as healthcare, are run through Washington. The spirit of entrepreneurship is slowly crushed under the boot of bureaucracy.
This future represents a new type of economic system. It represents a new kind of alliance between private and public interests. No longer are the two in separate realms, but rather, they merge into a new economic Frankenstein. The private sector exists, but needs the public sector. The public sector relies on taxes from the private sector. As such, the two amalgamate into a hitherto unseen creation. The result is an Americanized version of Fascism. The economics of Mussolini and Hitler with a Mickey Mouse stamp on top.
This future is not inevitable, but if we are to stave off such a fate, it must start with a paradigm shift away from government assistance in economic measures. Our current path towards government assistance in all areas of the economy must be rejected in favor of a laissez-faire and free economy. Can the allure of government money be resisted? If not, then the result of our lack of self-control will result in a economy marked by stagnation, bailouts, and a grueling lack of progress.
