The US Fiscal Stimulus Response to Covid is Staggering and Growing

I recently read a commentary from Gary Shilling, an economist.  Shilling wrote:

Fiscal stimuli alone equal 12.3% of U.S. GDP, the largest of any major country, according to the International Monetary Fund.

Wages and salaries are down 5% this year, but with all the government supports, total personal income is up 5%.

Not that I doubted Gary (He is excellent and worth reading.), I provided source links below.

https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#U

https://www.bea.gov/data/income-saving/personal-income

https://www.bea.gov/news/2020/personal-income-and-outlays-june-2020-and-annual-update

Keep in mind a few things:

  1. The fiscal stimuli referenced above is above and beyond “normal” government spending.  This doesn’t include social security, Medicare, Medicaid, defense spending or any other regular government spending.  That adds another 21% or so, meaning the government is now accounting for over one-third of our economy. 
  2. By all accounts, another stimulus bill is in the works.  This one is expected to be at least $1 trillion more.  Remember when “a billion here and a billion there and soon we’re talking about real money” was the saying about government spending?  Now we throw trillions around like dollar bills.  Honestly, I don’t think most people (including me and I’m a borderline economics nerd.) can comprehend these numbers.
  3. When has a government program ever been cut?

The best way to get out of this mess is growth.  For growth to occur, we need population growth and an environment that encourages risk taking.  We have neither.  We also have two political parties willing to spend right now.  There is no traditional conservative voice with any clout talking about reigning in spending.  Ugh.

The spigots in Washington DC are open.  I don’t see them being shut off anytime in the foreseeable future.  We won’t know when the well runs dry until it is too late.  That is a scary thought. 

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