Tuesday, March 16, 2021

Addendum to “How Bad is the $1.9 Trillion "Covid Relief" Bill?”

Last Thursday's piece on some of the crap hidden under the name of Covid-19 relief leads naturally to a follow up article today from FEE (the Foundation for Economic Education), featuring a list of the top 20 states getting bailout money from the bill. Let's cut to the chase and post the list, in descending order of amount of bailout money. 
  1. California: $42.3 billion
  2. Texas: $27.3 billion
  3. New York: $23.5 billion
  4. Tribal Governments: $20 billion
  5. Florida: $17.3 billion
  6. Illinois: $13.5 billion
  7. Pennsylvania: $13.5 billion
  8. Ohio: $11 billion
  9. Michigan: $10.1 billion
  10. New Jersey: $10 billion
  11. North Carolina: $8.7 billion
  12. Georgia: $8.17 billion
  13. Massachusetts: $7.96 billion
  14. Arizona: $7.48 billion
  15. Washington: $6.94 billion
  16. Virginia: $6.68 billion
  17. Maryland: $6.21 billion
  18. Tennessee: $6.12 billion
  19. Colorado: $5.9 billion
  20. Indiana: $5.7 billion
To begin with, it's much more widespread than I thought.  I knew about California and New York, but Texas and Florida?  Did you notice #4, Tribal Governments?  Why is this whole list even a thing?  The first thing they tell you, i.e., the first lie is that state incomes were down and they can't meet their expenses.  That's just not true; at least not as bad as they imply.  State revenues were down in the second quarter when the lockdowns were first ordered, but recovered fairly well in the third quarter and weren't down badly for the year.  JP Morgan said state revenue was “virtually flat” in 2020 nationwide while 21 states actually saw slight revenue upticks.

Graph from Chris Edwards at the CATO Institute.  The four rightmost bars are 2020, so compare the $474 billion in the fourth quarter of 2020 to the $470 billion in the fourth quarter of 2019.  Also note the vertical scale is exaggerated; the drop from the first to the second quarter - $22 billion - is a drop of 4.6%. 

That's telling me the $350 billion dollars was unnecessary spending.  If you assume that the taxpaying population of the US is 125 million people (derived from the USDebtClock) that means every taxpayer pays $2,793 for no apparent reason.  Except that it's never evenly divided; higher income taxpayers pay more, lower income taxpayers pay less.

The context we got before is that "red states are bailing out blue states," but there are red states in there, too.  The ratio favors the blue states, in that 13 of those got bailout money while six red states did.  The Democrats planning the spending package factored in not just population but also the number of unemployed citizens. This had the direct effect of skewing the bailout benefits toward states that enacted harsher lockdowns and punishing states who prioritized preserving economic activity.  It was, in many cases, Republican governors who opted for lighter restrictions and abandoned harsh lockdowns.  In states like this one (Florida), this has averted the unemployment and social destruction other states experienced—without producing noticeably worse COVID deaths. 

Perhaps the most incoherent and confusing aspect is that the state getting the biggest bailout, California, says they're running a budget surplus. To quote from FEE:
The only conclusion left to draw, however disappointing, is that Democrats crafted this bailout’s structure to favor states who pursued the COVID-19 policies they agree with—aka, states run by Democrats. Suffice it to say that political favoritism should never determine how limited taxpayer money is spent.

But, unfortunately, cronyism and favoritism are features, not a bug, of big government spending programs. As economist Ludwig von Mises once explained, big government programs concentrate enormous spending power in the hands of a few political officials; all but ensuring that favoritism follows.
Taxpayers in states that are doing well should not be paying Federal taxes that are functionally state income taxes in states they don't live in.  They shouldn't be paying Federal taxes to bail out other states.   


  1. We are in a post-truth, post-math world. It is all about rewarding the faithful and punishing the enemy.

  2. I would put CA's claim that they're running a budget surplus in the same category as Paramount Studios telling Art Buchwald in court that Coming To America never made a profit. With a straight face.

  3. Let me get this straight....I am looking at the first list and it has 19 states and one, not even sure what to call it, puesdo-government on it. What happened to the other 30 states in this union? Seems to me that the states that voted "red" in the last presidential fisasco (with the exception of Texas, not enough californians yet) got a collective goose egg. I guess that is what Washington thinks of "fly over" country.

    1. I am looking at the first list and it has 19 states and one, not even sure what to call it, puesdo-government on it. What happened to the other 30 states in this union? Seems to me that the states that voted "red" in the last presidential fisasco (with the exception of Texas, not enough californians yet) got a collective goose egg.

      Not exactly. The ratio was 13 blue to 6 red. But, yeah, Nancy and Chuckie are saying if you don't like it, go pound sand.

  4. Alice, Bob, Charlie, and Dave all decide to trade with each other with a currency. They work for a living, making useful products for each other. Evil Eve has convinced them all to let her run the money supply. Whenever Eve or her friends want something, all they have to do is "print money", or deficit spend (bank balance can go to negative infinity.) (Even crazier, Eve's debt is guaranteed not by Eve, but by ABCD) It's theft of a sort, but it isn't too onerous as long as Eve and friends keep it slow. The value of the currency goes down, but ABCD can still make ends meet because they still have control over useful capital and their livelihoods - they'll just raise prices.

    Now it seems Eve and her friends have gotten greedy: They'll print whatever amount of money needed to seize control of ABCD's land, resources, and capital and reduce them to slavery. That's about where we're at. The closer you are to the money spigot, the more time you have to grab hard assets and buy people out before the price-increases catch everyone else by surprise.

    Dave has to produce $1m worth of real value (real to ABC) to afford that $250k house. Eve just has to "deficit spend". Eve is going to get the house (and every other hard asset of value).

    There is only one way out at this point. Everyone knows it: The dollar has to crash. The useful people of the world have to start trading in some other currency that isn't controlled by the people looting them. People get nationalistic about this (must preserve world reserve currency or $BAD THINGS): Yeah, bad things for the people looting your country. Maybe not so bad for the small businessman doing something genuinely useful to the world, provided it happens fast enough, before he is reduced to serfdom by the monetarist looters.