How Government Spending Enriches the Wealthy

Covid relief programs and easy Fed policy inflated the value of assets such as stocks and real estate

By Vivek Ramaswamy. Excerpts:

"When Washington floods the economy with borrowed and freshly printed dollars, the money flows first into assets owned by the wealthiest Americans—stocks, bonds, real estate. Six relief laws pushed roughly $4.6 trillion out the door in the bipartisan response to the pandemic. The Federal Reserve cut interest rates to zero and more than doubled its balance sheet, from about $4 trillion to nearly $9 trillion.

Only some of that money reached working-class Americans. Economists at MIT found that about a quarter of the $800 billion from the Paycheck Protection Program went to workers who would have lost their jobs. Three-fourths landed in the top fifth of households by income, at a cost of $170,000 to $257,000 per job-year saved—a regressive windfall. The student-loan payment pause tells the same story: It has cost well over $200 billion and—because higher earners carry the biggest balances—most of that relief went to white-collar professionals.

As big government pumped money into the economy, assets boomed: The stock market has roughly tripled from its March 2020 low. The wealthiest 10% of households own 89% of all stocks, according to 2021 Federal Reserve data. The top 1% gained more than $6.5 trillion in equity wealth during the pandemic, while the bottom 90% added just $1.2 trillion. The wealth share of the top 1% hit a record high in mid-2021, and American billionaires’ fortunes swelled by roughly 70%."

"Consumer prices peaked at 9.1% in June 2022, with inflation growing at its fastest pace since 1981. Groceries rose 12.2% in a single year and gasoline nearly 60%. As paychecks lagged, real wages fell—down 3.6% over the year ending in June 2022"

"a post-pandemic property tax that hit states like Ohio hard. The only meaningful asset most middle-class Ohioans own is their house, and home prices in Ohio rose over 25% between 2020 and 2022. That paper gain was a financial curse for families intending to stay put: While real income remained flat, tax bills went up. Ohio homeowners absorbed, in 2023, the largest reappraisal shock on record. One analysis found the increase was more than seven times the size of the previous cycle’s, averaging nearly 35%."