We tend to under react to human tragedy and over react to economic tragedy.Anonymous
The COVID-19 pandemic is upon us. Its effect will be two-fold: human and economic. We have already demonstrated that we have underwhelmed the human effect to date with a lack of testing and a realistic deployment of medical devices – specifically ventilator systems. We are catching up rapidly with testing equipment and the manufacture of new and conversion of existing ventilator systems. There is also reason to hope that they are finding treatments for those infected with the virus, including an age old and tested malaria treatment – hydroxychloroquine coupled with azithromycin – are proving effective in treating the symptoms of the COVID-19 virus. (Understand that these are more in the form of palliative treatments than immunizations.) Short of finding a preventive inoculation, it appears that we have a fairly good roadmap of diagnosing and treating the virus but still well short of finding a cure. A better sense of logistics will accelerate universal testing and treatment, while a closer attention to social distancing and personal hygiene will flatten the curve of new cases. Beyond that I am just as much at sea as you are regarding the next steps for the human effect.
The economic effect is another matter. We are attacking this in a fashion reminiscent of former Presidents George Bush and Barack Obama where we just throw money around willy-nilly mistaking movement for action. You remember that Mr. Obama’s trillion dollar stimulus plan did nothing other than give raises to public employees and swell their ranks so as to increase the baseline for budgeting for the foreseeable future. The other major action was to throw money at the automakers rather than let them go through Chapter 11 (reorganization) bankruptcy – which they then did anyway after receiving the money. Despite now considering the third “economic stimulus bill, neither Congress nor President Donald Trump have a cohesive plan that filters money into targeted entities that cannot survive a downturn only for the limited amount of time necessary. And that applies to both personal aid (payments to individuals who are unable to work because of employers closing for the virus) and business grants and loans. While the short-term consequences may be to “shock” the economy, the long-term consequences may be to suffocate the economy by another staggering increase in the national debt. Of course none of us will get a look at the pending legislation and the underlying data, if any, that Congress is using until well after the bills are passed.
Since we will not see them, here are some specific critical elements that each of the three bills should consider:
- The aid should be of limited duration. Let’s not forget that Congress once enacted a tax to pay for the Spanish-American War – a war that lasted just under two months. However that tax lasted from 1898 through 2006 – a period of one hundred eight years. One hundred and eight years for a forty-day war. Congress is inert and they have demonstrated time after time that they cannot kill a program once it has been adopted. According to the National Council of State Legislatures, as of November of 2018 there were at least six federal agencies administering thirteen federally funded nutrition (food) programs. Congress never kills and old program they simply start another that may or may not overlap with existing programs. To ensure that we don’t create additional such programs the aid programs linked to the COVID-19 pandemic should be limited to ninety days and allow the President to extend the program(s) for four additional sixty day periods based on specific finding of need. Thereafter Congress would have to reenact the programs.
- Aid to individuals should be in the form of grants with no repayment required – much like unemployment payments.
- It is unclear whether retirees will be included in the aid distribution listed above. The economic impact on their investments upon which they rely for income is severe. If these retirees are not included than a special provision should be made exempting a specific amount of withdrawals from income tax. The amount of tax foregone should equal the amount of aid to others.
- Aid to business should be in the form of loan guarantees rather than grants. Where grants are required, the government should take a non-voting equity interest in the business until the grant is repaid from future profits. Let’s remember that General Motors has only repaid $23.1 Billion of the $49.5 Billion it got from the federal government. There is no reason to provide permanent equity infusion to massive businesses for a limited duration economic decline.
- No aid should be available to increase state or local government employment nor to give raises or bonuses to existing public employees. There is no reason that government entities and/or public employee unions should be enriched as a result of this economic downturn. (Let’s remember that the public employee unions are among the primary funding sources for the Democrat Party and that taxpayer money is used indirectly to fund their political activities. In a time of suffering they should not benefit.)
- No aid should be available to business with current cash reserves nationally or internationally. For such purposes, parent companies and holding companies should be considered an integral part of any company seeking aid.
- No aid should be available for stock “buy backs.” I understand the theory of using “buy backs” to stabilize stock prices for those who need to sell stock to pay bills but there is scant evidence that the theory actually exists in practice.
The point here is that this health crisis is temporary not permanent. Its effect on the economy should also be temporary not permanent. Failure to act on a timely basis can make the medical crisis longer and deeper. And over reaction to the economic crisis, particularly with regard to the long term costs to government, can make it longer and deeper. We only have to look back to the handling of the economic crisis by Mr. Obama that resulted in the most anemic recovery in American history – a recovery the Mr. Obama said would be the “new normal.” A recovery the watched the gap between actual employment and available employees in the Labor Force Participation Rate (as measure by the United State Bureau of Statistics) increase virtually every quarter during Mr. Obama’s tenure. A recovery that watched people remain on unemployment compensation for nearly two years. A recovery that saw the number of people on welfare increase dramatically and stay there until Mr. Obama exited the office. Ignorance is not bliss. Ignorance can make a bad problem worse. And ignorance in economics is preferring welfare over work, and public employee jobs and wages over the private sector.
During the congressional negotiations on aid for those suffering economically from the medical crisis, Speaker of the House Nancy Pelosi (D-CA) has tried to put the entire left wing social agenda in the package – including the Green New Deal. She is following the advice of former presidential aid and failed mayor Rahm Emanuel (D-Chicago) to never let a crisis go to waste. She is among the worst human beings on Earth for doing so.
This is no time for politics. This is the time for balancing legitimate medical concerns (driven by science and data) with legitimate economic concerns (driven by data and experience). I join those who have urged Congress to get of its collective ass and get this done.