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Transfer payments are payment made without a contemporary and corresponding delivery of a good or service. In other words, when you buy groceries, you give money to a store and get groceries in return.

When government send checks to people – without a corresponding delivery from the recipient of a good or service – it’s a transfer payment. Typical transfer payments include things such as unemployment, Medicare payments and so on. During the pandemic, transfer payments included the government sending checks to individuals, families and businesses.

The first spike is the Trump-era spending program. The second spike is the Biden-era pandemic spending. Some think the 2nd spending spike was too large, even unneeded, and may have led to today’s high inflation.

Interestingly, over time, transfer payments continually grow. Almost one-fifth of overall personal income is now government transfer payments. Transfer payments tend to increase during recessions and then fall back – a little – after the recession but usually remain higher than before. In this way, these spending programs increase in size, over time.

By EdwardM