Government spending enriched the wealthy by $6.5 trillion, Ramaswamy says

The pandemic-era spending spree that Democrats now want to expand transferred $6.5 trillion to the top 1% while working families absorbed a 9.1% inflation shock, according to a Wall Street Journal op-ed by Ohio gubernatorial candidate Vivek Ramaswamy.

Large-scale government spending, not capitalism, drove the widening wealth gap that now fuels Democratic Socialist political gains, Ramaswamy argued in a July 6 op-ed. The top 1% now holds about 30% of US net worth, while the bottom half holds about 2.5%.

"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," Ramaswamy, the Republican nominee for Ohio governor, wrote.

Six pandemic relief laws pushed roughly $4.6 trillion out the door while the Federal Reserve doubled its balance sheet to nearly $9 trillion. The stock market roughly tripled from its March 2020 low. The wealthiest 10% of households own 89% of all stocks, according to 2021 Federal Reserve data, and the top 1% gained more than $6.5 trillion in equity wealth during the pandemic. The bottom 90% added just $1.2 trillion. American billionaires' fortunes swelled by roughly 70%.

Working families footed the bill through two channels: inflation that peaked at 9.1% in June 2022 — the fastest pace since 1981 — and a post-pandemic property tax shock. Groceries rose 12.2% in a single year and gasoline nearly 60%. Real wages fell 3.6% over the year ending in June 2022, and the federal minimum wage reached its lowest real value since 1956.

The op-ed arrives as Democratic Socialist candidates gain momentum. New York's Zohran Mamdani saw all three of his endorsed candidates win Democratic House primaries on June 24, and more than 30 candidates backed by the Democratic Socialists of America have won primaries this cycle. A Gallup survey last fall found 66% of Democrats view socialism favorably while only 42% say the same of capitalism.

The $4.6 Trillion Transfer

Ramaswamy pointed to specific programs as regressive transfers. Economists at the Massachusetts Institute of Technology found that about a quarter of the $800 billion Paycheck Protection Program went to workers who would have lost their jobs, while three-fourths landed in the top fifth of households by income — at a cost of $170,000 to $257,000 per job-year saved. The student-loan payment pause, which has cost well over $200 billion, disproportionately benefited white-collar professionals who carry the largest balances.

Inflation's Bite on Working Families

For Ohio homeowners, the inflation-driven rise in home prices — more than 25% between 2020 and 2022 — translated into higher property tax bills as reappraisals caught up. Ohio homeowners absorbed in 2023 the largest reappraisal shock on record, with one analysis showing the increase was more than seven times the size of the previous cycle's, averaging nearly 35%.

Ramaswamy's proposed alternative — ending the bipartisan spending spree, unleashing energy production, and expanding the economy so paychecks stay ahead of inflation — will be tested in Ohio's November gubernatorial election against Democrat Amy Acton, who has proposed at least $20 billion in new annual spending. In California, a proposed 5% wealth tax on billionaires qualified for the November ballot, while Gov. Gavin Newsom has called for a national tax on Americans worth more than $100 million.

This article is for informational purposes only and does not constitute investment advice.