Financially Speaking: Is There Another Virus?

How Government Stimulus has turned into ordinary "Pork."

As 2019 began, many in Washington were concerned with the out-of-control spending by the Federal Government.

Just 2 years earlier, in 2017 total Federal expenditures exceeded $1 trillion dollars for the very first time. And now, in 2019 that number was expected to nearly double at 1.9 trillion.

Which it did with ease, incidentally.

Most of us weren't even used to speaking in terms of trillions back then. And here we were knocking on the door of a $2 trillion-dollar Federal Government Budget.

Then along came February/March of 2020 and all our lives changed dramatically. The Covid Pandemic struck. It closed shops, created social distancing, and self-quarantine became a way of life.

But so to did an incredible transformation in Government Spending. Remember we had only ever had 1 year where Government spending had reached 1.9 trillion dollars. And we were about to see two separate bills equal to or exceed that number.

First came the CARES Act, the Corona Virus Aid, and Relief Act. Signed into law by President Trump, this act at 2 trillion was far and away the largest single expenditure by the US Government…ever.

Then, almost exactly one year later President Biden signed into law the Second Relief Package. At 1.9 trillion dollars this was only slightly less than the original stimulus package.

Add to this the projected regular Government Expenditures, and we're on track to see Federal Government Spending triple the 2019 level this year.

It is an incredible record.

Now, if you add all the ancillary programs introduced by The Federal Reserve and the US Treasury, you come to a staggering $5 trillion as the bill today to fight the ravages of the Covid 19 Pandemic.

$5 Trillion keep that number in mind.

So you may ask the question: just why do we have to spend so much to support the economy through this recovery?. It's the same question that I've been looking into it.

There is an excellent tool that will let us measure the complete economic impact of Covid. And that tool is the latest measure of the total economy, the Gross Domestic Product.

On Thursday we will get the third and final measure of GDP. We've already had 2 measures, and we have a very good idea of how the economy declined in 2020.

The answer is ½ trillion. That's right the economy in 2020 declined ½ trillion from 2019's level of 21.4 trillion to 2020s level of 20.9 trillion.

To put it another way: total economic loss for the Covid year of 2020 was ½ trillion.

Yet Washington is spending 10 times that in the covid Stimulus Packages.10 times more than the economic loss. Something is amiss.

We could have paid everyone back for their lost income. Pay the workers their wages, paid the businesses their income. And that total would have come to a mere ½ trillion.

Instead, Washington is paying out 10 times the GDP loss.

Why? The answer, of course, is that much of these funds are directed to the favorite constituents of the Administration. The state and local governments who were in financial trouble, the schools, and teachers also in financial trouble, the union pensions and retirement plans likewise.

And that's how the Covid Stimulus Plan has morphed into an across-the-board recovery effort for financially mismanaged public/private entities throughout the economy.

Please take a moment to look closely at the expenditures of this latest stimulus plan, you'll find an abundance of what used to be called “Pork.”

Start listening to GDP: The Accountant’s Puzzle
Start listening to GDP: The Accountant’s Puzzle