The Once And Former MAGA Economy—How The Donald Broke It, Part 3
The Donald’s out-of-this-world pandemic spend-a-thons were an important reminder that fiscal profligacy is the handmaid of Leviathan. That is, even in a quasi-free society, citizens resist being regimented, bullied, herded and commanded. State actions that deeply restrict their freedoms, badly inconvenience their lives and seriously inflate their cost of living become distinctly unpopular. Very fast.
Unless…..unless at least a decent share of the populace is paid handsomely to acquiesce. That changes the compliance equation dramatically, as was so starkly evident during 2020-2021. And we are not talking merely about the classic free stuff to individuals—-the $2.0 trillion of stimmy checks and unemployment toppers.
Beyond that, upwards of $800 billion of “loans” went out to 11 million small businesses allegedly to encourage employee retention, which was easy as pie to comply with and resulted ultimately in $740 billion of forgiven repayments. But the real purpose of this tsunami of Federal cash was to squelch the political opposition that would otherwise have erupted in the small business sector. By definition the latter is heavily concentrated in the leisure and hospitality space, which was ground zero of the Lockdowns and the fear inspired consumer self-quarantines.
Likewise, upwards of $500 billion was showered upon school districts, local governments, the health care sector, social service agencies and every manner of NGO—all allegedly designed to help communities cope with a total, harsh disruption of their normal modes of daily existence. The hospitals alone received tens of billions of extra Medicare/Medicaid payments to test, treat, intubate and frequently bury patients who expired “with Covid”.
In short, by election season 2020 the American electorate would have been in noisy open rebellion absent the trillions of “compliance” payments which were being showered upon the public on a free-and-easy come-get-it basis. It was a veritable tsunami of cash from Washington the likes of which had never before even been imagined.
Unfortunately, the $6 trillion of Covid stimmies and bailouts did not function merely to quell the incipient opposition to what amounted to Donald Trump’s version of martial law. These massive, extraordinary flows of cash from the state to the main street economy also caused stunning economic distortions, which, in turn, became the motor force of the stagflationary economic disaster now plaguing the nation.
For instance, when households couldn’t spend their normal allotments at locked-down social congregation venues like restaurants, bars, hotels, resorts, sports arenas, movies etc, they cranked up their Amazon accounts for (safe) front-doorstep delivery of merchandise goods.
And not by just a lot. The surge in durable goods consumption, in fact, was just plain insane. The chart below tracks the Y/Y change in spending for durable goods, which fluctuated between +$50 billion and +$100 billion on an annualized basis during the years before the pandemic.
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