Hey, do you all remember when dollars made sense? You know, back when you had to actually have money in order to spend money, when companies were valued based on their current or future profits, when we worried about things like the national debt, deficit spending and budgets?
Take the COVID-19 relief bills, as a high-profile example. Here is a quick rundown of the money the federal government has pushed out the door in just the last 13 months or so:
• Coronavirus Preparedness and Response Supplemental Appropriations Act, March 6, 2020, $8.3 billion
• Families First Coronavirus Response Act, March 18, 2020, $225 billion
• CARES Act, March 26, 2020, $2.2 trillion
• Paycheck Protection Program and Health Care Enhancement Act, April 24, 2020, $483 billion
• Consolidated Appropriations Act, December 28, 2020, $920 billion
• American Rescue Plan, March 11, 2021, $1.9 trillion
Added up, that means the federal government spent or allocated nearly $6 trillion in the past year just on coronavirus relief. So that we are all on the same page, in 2019 the entire federal budget was $4.45 trillion.
For some portion of this spending spree – in addition to being one of its principal causes – large chunks of our economy were shut down, meaning not generating taxes. None of this, by the way, is an argument for or against the spending itself. It is simply a heads up that, one day, these bills have to come due, right?
Who knows, because we continue to successfully divorce logic from money.
The great GameStop fiasco of the last three months is another pointed example.
In January of this year, GameStop’s stock price rose 1,500% in two weeks, culminating in a high price of $483. Is that because the company is booming, that it figured something out during the pandemic and was likely to see soaring growth in the years ahead? Nope, not at all. The pandemic was particularly hard on the retail-based video game seller, and digital stores had already nearly crushed their business, which lost $673 million in 2018. No, the GameStop stock shot up because a bunch of people got together on a Reddit discussion board and decided that it should, in order to teach short sellers of the stock a lesson.
As a result of the success of the GameStop hype machine, entrepreneur/provocateur Dave Portnoy began touting a new investment vehicle called Buzz, which is an ETF that invests in companies based almost entirely on internet chatter rather than economic fundamentals. He had successfully monetized hype.
Now, President Joe Biden is suggesting that it is a good time to spend $2 trillion on infrastructure. The proposed legislation, dubbed the American Jobs Plan, would ostensibly be paid for by raising corporate tax rates. (The tax increase, by the way, has been named the Made in America Tax Plan. Who could ever vote against that?)
Generally speaking, we support investment in infrastructure, but is now the time? Is it really time to raise taxes and increase spending on the heels of an economically devastating global pandemic? Maybe. Maybe dollars just do not make sense anymore. But the bill has to come due one day, right?