The federal government has received heavy criticism from various quarters for its response to the pandemic. Now the successes come from the government’s own economists.
A new study released by the Federal Reserve Bank of St. Louis analyzed the government‘s Paycheck Protection Program (PPP), an $800 billion program that distributed forgivable loans to small businesses.
The study’s authors, William R. Emmons and Drew Dahl, economists at the Federal Reserve Bank of St. Louis, concluded that while PPP was timely, it was poorly targeted, expensive, and regressive.
Nearly 75% of recipients were unwitting recipients, the economists wrote, and the funds mainly benefited wealthy households.
“Because of the differences in incomes typical of these different constituencies,” Emmons and Dahl write, the program “ended up being quite regressive compared to other large COVID-19 relief programs, as it benefited households significantly more high income”.
While the program was successful in saving three million jobs, the authors point to an MIT study – led by economist David Autor and written with nine co-authors – which showed that job savings were extremely expensive.
“The study found that, depending on the assumptions, the cost per job saved for one year was $169,000 to $258,000, which was well above the average amount – $58,200 – paid in wages and benefits to small business employees in 2020,” Emmons and Dahl write. “The authors concluded that the PPP cost taxpayers about $4 for every $1 in wages and benefits received by workers in “saved” jobs. The “leak” – $3 out of $4 distributed through the program – went to small business owners. »
The MIT study also found that the PPP was “highly regressive,” with around 75% of the benefits gobbled up by employees in the top quintile, or top 20%.
“The biggest transfer of wealth in history”
A year ago, I noted that the top 1% of people held record wealth in the United States.
It’s no mystery how it happened. Federal Reserve data shows that US households added $13.5 trillion in wealth in 2020, largely thanks to government “stimulus” spending that flooded the system with money.
This new wealth, however, was not fairly distributed. Nearly $10 trillion went to households in the top quintile. It is not a coincidence.
Carol Roth, financial expert and author of The War on Small Business, noted that CARES Act spending clearly favored those closest to power.
“Covid-related ‘relief’ efforts by the government and the Federal Reserve at every turn have favored the already wealthy and well-connected,” Roth told me. “They enabled the largest and most historic transfer of wealth the world has ever seen – billions of dollars going to Wall Street at the expense of Main Street.”
The average American may have benefited relatively little from this flood of spending — maybe a few stimulus checks — but they are still paying for it, literally, because of the policies that triggered historic inflation.
With the US economy likely already in recession and consumers struggling with 40 years of high inflation, supporters and politicians will be looking to find convenient scapegoats to explain the pain.
Just remember that it was not “capitalism” that caused the lockdowns or printed billions of dollars out of thin air. They were the central planners and the central banks.