Stimulus Vs. Spending

There's a bit of a wrangle right now regarding stimulus versus costs.

The basic argument: The more the government pays out in stimulus money, the more it will cost us, the taxpayers, in the long run.

This is a true statement. Think of the national debts we already have on the books: The Iraq War (yup, still paying for it), followed by the Great Recession bailouts. (Remember the great parties the banking industry threw themselves that year?! Still makes me angry 😡)

After that, we had tax cuts in 2018, followed by the pandemic which shrank the economy, along with not one but two relief bills totaling $3.1 trillion. With a T 😲

So now that you're nice and depressed, I'll wait while you go get a piece of chocolate or a glass of “something stronger” of your choice 🤣

Back already? Nice. So here's the deal: Some people think we need more economic relief. Some do not.

Let’s take a closer look at some of the biggest issues and support for/against:

• We don’t need more stimulus because unemployment is back down to 6.7% and the economy grew in the last six months of 2020 📈
  A 6.7% unemployment rate is higher than ideal, but it’s not the crushing 14% of April 2020. So it’s true- The unemployment numbers themselves don’t merit a lot of “help” from the government. Nor does the GDP growth of the tail end of 2020 👍
  Unfortunately, we don’t know what the future holds- are unemployment and GDP going to go up & down in waves over the next year or two? 🤷
  If so, we can’t close the door on stimulus/relief altogether; we need to remain flexible in our ability to deploy stimulus (and/or relief) to the neediest families, quickly. Helping families avoid poverty makes sense, financially, for a nation.

• 25% of households are suffering economically… but that means that 75% of households are not. Should we give out lots of government money, to people who don’t truly need it? 🤔
  Nearly everyone’s natural reaction to this question is going to be a strong “No!” But you know what to expect from me- let’s look deeper 😁
  True, more people are doing well than are doing poorly. But 25% of a population is a lot. Think of you and your closest 7 friends; if two of you have cancer, that’s a pretty high proportion of friends who are sick! Substitute any calamity for cancer- that’s a lot of calamity! 😳
  Now let’s talk about what “need” means. Let’s put this in perspective and compare Generation X- whose 401ks may not have survived 2008- with Millennials- whose education & job opportunities were affected by that same crisis. Millennials are making an average of $2,000 more than their parents were at the same age- an increase of about 0.1% per year- but the cost of real estate has increased by 4% per year, and higher education costs increase by about 8% per year 😲
  What’s the point of that particular comparison? To show that someone doesn’t have to be in poverty in order to need help. Despite Millennials technically making more money than their parents, and being better educated, they are not better off, financially, as a generation- and some research says that that’s because of anemic stimulus to families after the 2008 crisis 🤨

• Runaway spending will hurt people more later, as taxes are raised.
  Sorry to tell you all, but that ship has sailed. It sailed off, and before it got to the sunset, it caught fire, burned, sank, and then was eaten by sea monsters 😆😳😨😥
  The national debt is ridiculously high- and it’s the doing of both political parties, if we’re being honest with ourselves. We’ve already had runaway spending, for decades, and refusing to help people now is like closing the barn door after the horse got out 🤷
  That being said, runaway spending is never good; but judicious, smart spending is always appropriate. The 2008 bailouts went to companies; the 2020 stimulus was intended more for small businesses and families, closing huge loopholes that existed in the 2008 bailouts 👍
  In another perspective, tax rate hikes are downright inevitable. The highest that marginal tax rates have ever been was in the 1950s, when there were 56 tax brackets and the highest rate was 91% (this was for people making over $17 million/year in today’s dollars) 🤯
  Tax rates today? 7 tax brackets, with the highest rate at 37%. All politics aside, anyone who thinks current tax rates are at all sustainable…? Well, they’re going to be deeply disappointed 😆

So what’s the conclusion? Do we need more stimulus, or do we need to pull back, to reduce tax increases in the future? 🤔

As angry as it may make some of you, both sides are “right” in several ways. My goal today was to introduce everyone to some of the underlying issues at hand, and possibly information or a perspective that you haven’t seen before, in a manner respectful to all.

These issues are more complicated than they seem on the surface. But they are worth paying attention to and understanding, because they are going to affect you and your family- personally- now and later.

Now That's Smart Money 🧐