I’m old enough to remember the woebegotten decade of the 1970’s: bad hair, bad clothes and a stagnant economy. Nixon took Lyndon Johnson’s Great Society, a massive expansion of government, and made it even bigger. On top of that, both Johnson and Nixon funded the war in Vietnam, while pushing the Fed to slash interest rates and loosen the money supply. Nixon is billed as a conservative, but he was really a big-government Republican, a RINO (Republican in name only). The result of Johnson-Nixon policies in the 60’s and early 70’s was a nagging inflation that lasted until the early 80’s. It ate into buying power and drove up interest rates for mortgages and car loans to unimaginable levels; 15% mortgages were common.
The 2020 Federal budget is $4.7 trillion. Now add to that the bipartisan spending free-for-all of $2.2 trillion dollars in Covid-19 “stimulus,” and an additional $4.4 billion for small businesses. This brings the total to $2.64 trillion. We don’t have the money. The Fed is increasing the money supply, meaning that we’re printing money. There is a ton of money out there and zero goods and services being produced.
I have problems with the so-called stimulus. One, the economy doesn’t need stimulating; it needs to be reopened. People need to get back to work. The economy was in great shape before the government shut it down; growth was steady, inflation and unemployment were low, the stock market was humming along and wages were rising. The $2.64 trillion is really meant to help people get by until the economy reopens and we can get back to work. I agree with the concept, but disagree with the size and the terminology. From the point of view of branding, calling this a stimulus is caving to a Democrat narrative and a tacit endorsement of failed Democrat economic policies. FDR, and Obama after him, borrowed and spent and piled up debt with little benefit to the economy.
There is an old economic nostrum that inflation is caused by too many dollars chasing too few goods. There’s a lot of cash out there, and few goods being produced. It is said that history repeats itself. Are we going to repeat the inflation and economic doldrums of the 70’s? I hope not, but all the ingredients are in place.
Michael A. Morrongiello, Ph.D.