COVID-19 Economic Policy, Stagflation, and Elite Wealth Consolidation – Opinion

The fiscal and monetary policies enacted by both the Trump and Biden administrations in response to COVID-19 have encompassed an unprecedented level of government spending, with desultory impacts on our country’s economic outlook.

The federal government spent an incredible $1,02,000 in January 2022 $3.6 trillionAnd is required to spend an additional $500 billion.

These are the most expensive programs:

• $848 Billion in Direct Payments to Qualified Americans
• Subsidized loans for small businesses worth $827 billion
• $720 billion combined in unemployment benefits and insurance benefits
• 500 billion dollars in assistance for emergency purposes to local and state governments
• Funding for public health projects such as vaccination distribution is $350 million
• Grants to Educational Institutions: $275 Billion

They have not helped the most vulnerable people affected by the pandemic nor improved macroeconomic health.

According to the National Bureau of Economic Research, 72 percent of all small business loans were disbursed, although they are supposed to target low- and middle-income Americans.

The other two costliest programs – unemployment benefits and direct payments – have been equally counterproductive.

An NBER survey found that people who receive unemployment benefits are less likely to go back to work after being out of work for several weeks. Although the unemployment rate is now at 4 percent, as of February 20, 2022, it only covers those who can work and are available to do so. Actively looking work.

The most recent Bureau of Labor Statistics report will show that the figures are not as high now than they were before the pandemic.

• The labor force participation rate sits at 62.2 percent, in comparison to February 2020’s 63.4 percent.
• The number of long-term unemployed – individuals jobless for 27 weeks or more – remains 1.7 million, in comparison to 2020’s 1.1 million.
• The total number of jobs is almost 11,000,000, which compares to the 6 million available two years back.
• Continuing a recent concerning trend, approximately 1 million additional individuals voluntarily left their jobs in January 2022, a statistic that was not highlighted by the BLS prior to the pandemic’s arrival.

Why are people so resistant to working? Well… Why work, when you can receive money for doing nothing?

The U.S.’s economy has many problems, including the problem of unemployment.

One, even though the U.S. Gross Domestic Product (GDP), has seen a sudden spike in recent months, it is only temporary. Direct payments to consumers and benefits are being used now that society is reopening; December 2021 saw personal consumption expenditures reach $16.5 trillion, which was the most high level ever recorded in U.S. History.

However, the economic growth resulting from this demand surge isn’t sustainable for many reasons.

As the biggest welfare program in American history ends, consumers will begin to demand non-essential goods and services less frequently.

Second, this increased demand is interconnected with ongoing supply chain disruptions that have led to a lack of product availability. Anybody who has ever taken an introduction to economics course will know that high demand leads to low supply. Higher prices are the result. Inflation rose from 1.4% in January 2021 to 7.1% in December. This is the fastest single-year growth since the 1970s stagflation. Services have experienced higher prices than basic tangible goods like gasoline, clothing, and other household items.

The U.S. Federal Reserve will raise interest rates to curb rising inflation. This is the standard monetary policy reaction to rising inflation. However, increasing interest rates won’t solve our supply-chain problems or reduce the demand for essential goods most affected by price increases.

What raising rates will do, however, is reduce the incentive to borrow and invest – the key to sustained economic growth when done in moderation.

Meanwhile, as the Fed focuses on a problem it cannot fix, it continues to propagate perhaps the most insidious impact of our government’s fiscal and monetary policy agenda: a massive concentration of wealth and power by corporate and financial elites.

Companies have found ways to increase profits by leveraging relaxed regulations as well as soaring inflation. More than half (of the over 1000 anonymously surveyed) company executives recently acknowledged that they use inflation to raise prices, well beyond what is necessary to offset production costs. As former Secretary of Labor Robert Reich recently wrote, “They have enough market power to pass these costs on to consumers, sometimes using inflation to justify even bigger price hikes.”

Corporations have reported record profits, reporting $1.7 trillion after-tax profit in the third quarter 2021. The CEOs are the ones who have seen their salaries rise 16 percent in 2020, compared with 1.8 percent for employees.

As for financial institutions, the Fed has directly empowered banks and investment companies via myriad policies including decreasing the federal funds rate, extending the length of the loan discount window, generally relaxed regulatory oversight, and authorizing virtually zero-interest loans to its “primary securities dealers” via the re-establishment of the Primary Dealer Credit Facility (PDCF). The Fed’s obsession with quantitative easing has not stopped. It continues to purchase massive amounts debt from financial institutions, in exchange for trillions more dollars, which flows directly through banking channels.

Investment companies and banks have both benefited greatly. JP Morgan for instance reported post-tax profits at $48.3 Billion in 2021. This is 35% more than their previous record. Goldman Sachs reported similar high profits and paid out million-dollar bonuses to their top employees. Blackrock – directly hired by the Fed to work as its agent during the early stages of the crisis – has increased its holdings from $7.4 trillion to $10 trillion in assets under management over the past two years. This has made the elites wealthier; during the pandemic, billionaires enjoyed a 70% increase in their net worth.

Let’s conclude. What have our COVID-induced federal fiscal policies engendered. There is a dramatic concentration in wealth among the most powerful members of society and an economic house made of cards.

Jack McPherrin ([email protected]) The Heartland Institute’s research editor.