2. Money can't buy happiness
Americans received a historically unprecedented amount of money in 2020; even more is expected soon. The cash has made us richer, but it has also exacerbated inequalities, and it certainly hasn't cheered us up.
Why it matters: One of the biggest government spending programs of all time has come largely in the form of direct cash transfers to individual Americans. That's helped to drive wealth to all-time highs.
- Most of us don't need the extra $1,400 that we're going to receive pretty soon, on top of the $600 we received from the government this week. As a whole, Americans are richer than we've ever been, flush with government cash and struggling to find places to spend it.
- Meanwhile, millions of Americans are in desperate need. The number of Americans living in poverty rose by 7.8 million just between June and November, bringing the total to an unconscionable 38 million.
- Those Americans need to rely on local services — but local governments are staring down a fiscal black hole, and have no choice but to cut rather than expand their budgets, thanks to balanced-budget rules.
By the numbers: Some 150 million Americans received a $600 check from the federal government this week. Many of them watched President-elect Joe Biden promise Georgians this week that "if you send Jon and the reverend to Washington, those $2,000 checks will go out the door."
- With the election of two new Democratic senators, the $2,000 checks are now extremely likely to happen.
- They come on top of $2.9 trillion in already-passed stimulus spending, which has raised personal disposable income by more than $1 trillion.
- Overall, some 20% of Americans' personal income in 2020 came in the form of government transfers.
The catch: Much of the money didn't go to where it was needed most.
How it works: Government cash has sluiced into all manner of asset classes, from stocks to houses to bitcoin. In turn, the prices of those assets have soared, creating an even bigger wealth effect.
- The S&P 500 ended the year with a valuation of $31.1 trillion, up roughly $10 trillion from its lows in March.
The bottom line: 2020 was one of the longest and hardest years that any of us can remember, filled with illness, grief, loneliness, fear, and death. As the pandemic continues to rage into 2021, politicians will respond by sending us more money.
- What we really needed, however, was an effective and coordinated pandemic response. That, rather than any fiscal action, is the first order of business for the incoming Biden administration.