Social benefit recipients are ultimately the biggest losers
The Covid Stimmy payments seemed to keep many playing along… Not sure how these payments help the economy or reduce the debt, except provide a few trips to the grocery store for those that use it wisely and after they spend it they still need money…
So really it was money given to the people who then distributed it to the corporations, who took out even more loans and created more debt.
Greg
While on the surface it may seem counterintuitive, the ostensible beneficiaries of social welfare in its many forms are actually the most adversely impacted over the long term.
Socialism ultimately consolidates the wealth and power over those who depend on these “benefits.” What’s worse is that over time, the social benefit recipients become ever more dependent on the governing authorities for social transfers.
Let me explain…
Intermediate level microeconomic theory at work
In this instance, we’ll contemplate what a direct monetary injection, like the covid stimulus payments or Trump’s envisioned tariff dividend, does to the economy.
The money that is generated is placed into the hands of the recipient, who then goes out and spends it. The asset owners are the ones who ultimately accrue this extra spending as profits.
To wit, the shareholders of the biggest corporations like AMZN, WMT, MCD, NKE, MSFT, etc. profit the most from these social benefits. Thus, the wealth is consolidated onto the balance sheets of the asset owners. Landlords and shareholders come out ahead, with the largest assets owners benefitting the most.
The sad-sack benefit recipients largely spend all of that extra money and have nothing to show for it, except for a bunch of depreciating assets and fast food wrappers.
Unfortunately for the poor spender, all of that extra government injected money stimulates demand and just works to ultimately raise the economy’s equilibrium price level.
Yes, in terms of overall microeconomic theory, all of the extra benefit money that is dispensed out to the citizenry ultimately works to just raise price levels in the intermediate to long term, with no true economic gain measured.
Why? This spending was achieved through taxes and debt. It is a zero-sum game in this regard. While spending increased, the resulting debt must be serviced, which just drags down future economic growth. Taxes also takes the money out of the taxpayers pockets, reducing demand.
Here is the clever transfer of wealth in action; debt financed money leaves the government coffers, which goes to the benefit recipient who spends it. This money is then captured as revenue and eventually as profit on the balance sheets of the corporations and landlords.
The process continues and the asset owners continue their wealth consolidation and essentially use the government as a self-generating mechanism to accumulate their wealth and power over the masses. The whole Crux of socialism is based on ultimately impoverishing those the social programs are intended to help.
Our gut instincts are correct
So Greg, you are correct in many assumptions. The government can either spend its tax revenue or finance spending through deficits.
As we can see in the real world, multicultural socialism is very expensive and is ultimately achieved through the generation of trillions of dollars in debt.
The government accrues the debt, which is inflationary by nature. The deficit spending essentially raises the money supply. This money is then dispensed to the average person. These people then spend the money. The money is ultimately captured by the asset owners.
Of course, anyone can make a claim that stocks are very expensive. But the more fiscal deficit spending that accrues, the more money that is captured as profits by the corporations. Landlords and real estate investors also benefit, because overall demand is stimulated by all of this extra money and rents ultimately keep rising as a result.
That’s right, everyone loses out from the indirect tax of inflation. However, if one has acquired enough income generating assets, he can keep up or move ahead of those around him.
Socialism is a very clever means to impoverish society, while enriching the wealthy. In socialism, only the top 10-15% in balance sheet wealth come out ahead in the long run. Socialism’s ostensible beneficiaries are the ones who keep falling further behind.