Who's paying for this?

I tried all weekend, but I still can’t get past this headline from Morningstar.com: “5 Stocks to Spend Your Stimulus Check On”.

The article references a recent Deutsche Bank survey of online investors. Half the respondents 25 to 34 years old said they plan to spend 50% of their stimulus payments to buy stocks.

I’m generally in favor of millennials getting an early start in the free enterprise system, but is this really what we had in mind when it comes to COVID relief?

Clearly, there are people who need help. Lots of them. It could take years for millions of Americans to find their place in the post-pandemic economy, and it’s smart for the rest of us to help them get back on their feet.

As a whole, however, U.S. is getting along very well financially. The average American currently has a net worth of about $390,000. And if you take out our 2,100 billionaires, the average net worth is still a respectable $333,000. That’s the highest standard of living ever seen in this country.

Individuals have even been able to raise cash and pay down debt during the pandemic. U.S. private sector leverage hasn’t been this low since 1976, and personal debt is 40% below where it peaked in early 2009.

If only we could say the same about the federal government.

Total federal debt held by the public is now about the same size as our economy: about $22 trillion in annual gross domestic product. The ratio hasn’t been this high since the end of World War II. Thanks to record low interest rates, however, it’s not necessarily considered a looming crisis because the government is able to cover interest payments fairly easily. And interest rates will probably stay low forever, right?

Retired economist and blogger Scott Grannis: “We’ve been consuming a lot of our seed corn, instead of saving and investing for the future, and this can’t go on forever without serious and unpleasant consequences.” Grannis believes the government’s spending/borrowing/printing spree will eventually lead to smaller gains in net worth and a slower increase in living standards for our children and grandchildren.

Speaking of kids and grandkids, the recent stimulus package also makes student loan forgiveness essentially tax-free, and there are still hopes that up to $50,000 per borrower could be cancelled by the government altogether. That might further stimulate an economy that arguably doesn’t need it, while simultaneously sending a dangerous message to anyone who borrows for college: run up the tab as much as you can, might get a bailout one day. And what do we say to all those who’ve already paid off the inflated cost of their college education? Do hard-working people who play by the rules get free government money?

I’m haunted by a familiar quote by the French political philosopher Alexis de Tocqueville: “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury."

A trillion dollars here, a trillion dollars there – I’m probably making too much of this. It’s just that – like many other people on both ends of the political spectrum – I wonder who’s going to write the check when the bill comes due.

And who will cash it.

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