As of April 25, 2020, more than 30 million Americans were receiving unemployment payments. Around 10 million more who had been self-employed were suddenly unable to earn an income yet found they could not file claims because of antiquated state systems. The federal CARE Act was passed by Congress to support all those now unable to work because of the Covid-19 Pandemic, including the self-employed. Tens of billions of dollars were transferred to state governments for unemployment programs.
By mid-May, around 40 million newly unemployed Americans will be receiving payments to be unemployed — or to be more specific — paid not to produce any products.
At the beginning of the Pandemic, 67.9 million Americans were already being paid by Social Security Administration programs to be unproductive. (SSA.gov) There are approximately 230 million adults over the age of 18 in the United States. By mid-May, a staggering total of 108 million of those adult Americans will be receiving money to remain unproductive. That is an incredible 47% of the population being paid to do nothing.
At the same time, with some overlap, 40 million Americans receive food aid from federal Supplemental Nutrition Assistance Programs (SNAP). In addition, the federal government pays for childcare for about 1.5 million children. This does not include state and city welfare programs. As an example, the state of New York was providing welfare payments to 600,000 people before the pandemic began.
Officially the United States budget is nearly $800 billion for other welfare programs, not including social security. The $800 billion does include Medicaid, but not Medicare.
As of May, estimates are that $3 trillion will be passed out in “transfer” payments during 2020 to individuals not to produce any products, although the recipients will buy products including medical care. While termed “transfer payments,” that is not a true definition because a large portion of the money does not come from taxation, but rather from the federal government just printing the money.
Initially the federal government was projected to spend about $1 trillion more than was received in taxation for fiscal 2020. With additional pandemic spending so far, and reduction in taxes paid, the government is projected to borrow $4.5 trillion — the emphasis being on “so far.” (WSJ 5/5/20)
This massive amount of money from the central government does not include the roughly $4 trillion the Federal Reserve has pumped into the system so far this year to prop up the casino known as “the markets.” Now the Fed is buying ETF corporate bond funds.
Here is the big question: Where will the products come from that tens of millions of Americans are being paid not to produce?
In my book, Utopian Road to Hell, I wrote of my experiences in the Soviet Union just before the Great Collapse. I witnessed, firsthand, the result of people being paid to produce little or nothing. The Soviets invented the reusable shopping bag, but not to be “green.” Everyone had a folded-up bag just in case something became available. Women carried them in purses, men in lunch pails or briefcases. Lines would appear out of nowhere, sometimes at a street corner waiting for a truck to pull up to sell food, or even durable goods, on the black market. Tens of thousands in Moscow went to flea markets such as Levsha, which now sells mostly nostalgia items, but back then it was to find necessities.
The Soviet people were not poor, as depicted in Western media at the time. They actually had plenty of money because there simply was nothing available to buy with their earnings! “For the good of the people” prices were fixed far below production costs, and jobs were guaranteed for life. Workers were paid regardless of the profitability or quality of their products. The Russian and Ukrainian areas of the Soviet Union had more fertile farmland than the United States, but still had to buy grain because of the lack of productivity.
In the Soviet Union, the retirement age was set at 60 for men and 55 for women, to show the world that communism did more “for the good of the people” than Western nations. (Note: President Putin tried to rectify the early retirement of productive people and saw his popularity immediately drop.)
During the years of perestroika (1985-1991) and after, I maintained a jointly owned company in the Soviet Union. In Moscow the metro cost about two cents to ride, at a time it was almost $2 in Paris.
Bread was the equivalent of 5 cents a loaf, yet probably cost in the area of 50 to 75 cents a loaf to produce. The costs were of course fixed “for the good of the people” and as a result bread was rarely available — although lots of moldy bread could be found in dumpsters. That’s because whenever bread was available, people would grab far more than they could use, causing hoarding shortages.
The core of the problem was, of course, workers being paid far more that the value of the products they produced. The products may have been of poor quality, and with quantity lacking also, but they did produce something.
Currently in the United States, “for the good of the people” nearly half of the adult population is paid to produce nothing at all.
This works so long as third-world nations manufacture and grow products of value that Americans can buy at ridiculously low prices, with money our government just prints. The system will continue to work as long as our nation can force on others the use of the dollar as the world’s currency.
There is more “for the good of the people” to come. So much more “for the good of the people” that the dollar may lose its value regardless of our military and current economic strength. Nancy Pelosi, for all intent and purposes the head of the Democratic Party, has moved in the direction of a “universal minimum wage” proposed by Andrew Yang, Bernie Sanders and other socialists.
In light of Covid-19, Senator Sanders proposed $2,000 per month per person as a “universal minimum wage” for every American. Presumably, a family of four would receive $96,000 a year. Who in a family receiving that much money would be willing to work anywhere, even for $14 an hour which is the highest minimum wage in the nation? (That wage is in Washington, DC of course). By working, the individual in Washington, DC would make just $29,120 a year, versus $24,000 a year tax free to do nothing.
Then who will bring in the crops? Illegals? Not if illegals are included in the universal minimum wage “for the good of the people.”
Some high paying manufacturing jobs such as those in defense will be filled, but not many more.
At some point China, Vietnam, Bangladesh, India and the rest will begin to realize that the paper we are handing them cannot be used to buy anything, because America produces little but armaments, and Boeing airplanes that are lead balloons. At that point, the whole scheme fails. It is, after all, a Ponzi scheme that promises more and more out of the pot, for less and less put in the pot.
Again … where do the products come from … the products all that money being printed “for the good of the people” will be able to buy?
The products simply will not be available, and Americans will carry around their bags hoping to find something, just as did the Soviet citizens who lived in a nation that provided little more for “the good of the people” than hunger.