Wesley's Rant: Free Lunch?

Wednesday, August 19, 2020

“There is no such thing as a free lunch” is a popular saying communicating the idea that it is impossible to get something for nothing.  The phrase was in common use by the 1930s, but its first appearance is unknown.  The “free lunch” refers to the once common of traditions of saloons in the United States proving a free lunch to patrons whose dad purchased at least one drink.  Many of the foods on offer were very high in salt so that those who ate them ended up buying a lot of beer.  This phrase has been attributed to many different people.  Rudyard Kipling wrote about it in 1891 and Milton Friedman used it the title of his 1975 book on economics.  Regardless of who said it, the concept is certainly one of the basic economic truths.

If one individual or group gets something at no cost, somebody else ends up paying for it.  Greg Mankiw described the concept as follows: “To get one thing that we like, we usually have to give up another thing that we like.  Making decisions requires trading off one goal against another.”  In reviewing some of the recent economic data, reports are indicating a large gap between supply and demand.  If you look at retail sales in the United States, they dropped dramatically in March and April, closing 21.7% from the level in February.  Since then, retail sales have rebounded dramatically, rising 18.2% in May and 7.5% in June.[1]  In fact, retail sales are now 1.1% higher than a year ago while at the same time unemployment has risen from 3.7% to 11.1%.  However, at the same time, industrial production is down 10.8% from a year ago.[2]

How can Americans go out and buy more when they are making less?  The answer is very clear when you look at the Federal Budget Deficit for the month of June 2020.  The deficit for June 2020 was $856 billion larger than the deficit recorded in June 2019.  This is the largest monthly deficit ever recorded.[3]  At this point 9 months into the Federal Governments FY 2020 budget, the government is running a 2.7 trillion dollar deficit.  Also, Congress is debating a “phase 4” stimulus program arguing about spending another $3 trillion as compared to $1 trillion because of COVID-19.  Government transfer payments were up 86.7% from a year ago due to tax relief checks sent out by the IRS, in addition to the substantial increase in unemployment benefits and let us not forget the Paycheck Protection Program.[4]

These government transfer payments made up 30.6% of all personal income in April and 26.4% in May.[5] 

The answer to the question in the previous paragraph is simply borrowing from the future through government deficits.  At some point, the bill will come due and for many, it may come as a surprise that the bill will come due much sooner than later.  Some economists are estimating that the Federal deficit will exceed $30 trillion by year’s end.  I strongly suggest individuals concentrate on paying down their own debt!  When the bill comes due from the Federal government you need to be prepared.

From our entire team at The Wiser Financial Group, we are here for you during these times.

Thank you!


Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wiser Financial Group is not affiliated with Kestra IS or Kestra AS.


[1] This email address is being protected from spambots. You need JavaScript enabled to view it.

[2] This email address is being protected from spambots. You need JavaScript enabled to view it.

[3] Peter G Peterson Foundation July 2020

[4] Peter G Peterson Foundation July 2020

[5] July Deficit Tracker, Bipartisan Policy Center

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC, or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor about your individual situation. Comments concerning the past performance are not intended to be forward-looking and should not be viewed as an indication of future results.


Wesley Lentz Wesley Lentz

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Neither Kestra IS nor Kestra AS are affiliated with The Wiser Financial Group nor any other entity referenced herein. Neither Kestra IS nor its affiliates provide legal or tax advice and are not Certified Public Accounting firms. 

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