You can lead a horse to water, but you can’t make it drink. At least, that’s what I always heard.
Apparently when United States Congressmen and senior federal and state officials were growing up, they heard that aphorism expressed as “lead a horse to water and bribe it to drink.” With a $900 billion dollar omnibus spending bill on the way to the President’s desk as of the writing of this article, the U.S. is about to pass its second largest stimulus bill ever, second only to the CARES Act passed back in March. Since the Coronavirus pandemic hit US shores in March, the federal government has thrown more money at pandemic relief (in inflation adjusted dollars) than the entirety of spending for the Interstate Highway Program, the Panama Canal, and the First World War. With around $3 billion between the recent omnibus bill and the Coronavirus Aid, Relief and Economic Security (CARES) Act, Coronavirus relief has accounted for a government expenditure equivalent to 3/4 of the total cost of US involvement in World War Two.
In other words, there is a lot of “relief” money floating around. So much, in fact, that somewhere between 20% and 30% of all U.S. dollars currently in circulation were printed in the last year.
For this unprecedented bill on Uncle Sam’s tab, the everyday American has gained $1800 worth of direct aid and, if his employer filled out the labyrinthine paperwork required to receive a Paycheck Protection Program (PPP) loan, he might have kept his source of income in the event that his employer was forced to shutter.
In other words, in a time of extreme economic upheaval, the little guy is getting next to nothing. Juxtapose this with tax breaks and incentives, like the so-called “three-martini lunch” tax break that provides a write-off on business meals, it seems that the aim of targeted government relief is obvious. They want to, well, stimulate the economy.
Government policy is to attempt to get those who have money already to spend more of it, thus hopefully keeping businesses afloat and working class people on the payroll so that Congress won’t have the shell out more direct cash assistance to the working poor, a nigh-universally popular policy that they have nevertheless shunned like leprosy.
There’s only one problem with this approach. In order for stimulus to work as traditionally understood, the economy has to actually be open and people buying and selling, but in many US states, the economy is effectively shuttered. In many West Coast and Northeast states where governors have been particularly diligent in enforcing stay-at-home and lockdown orders, commerce has effectively ground to a halt. States like the famously-strict Michigan lost half a million jobs and tanked state GDP by more than 10%.
That is a fate which states like Tennessee have avoided due to a combination of factors but, we might think, primarily due to less government restrictions on businesses. That has come at the cost of increased transmission and hospitalization rates, as currently Tennessee is the worst state in the Union for number of cases per 100 thousand residents.
Tennessee stands to gain most, hypothetically at least, from targeted economic relief given that we, unlike other states, currently have an economy to relieve. Granted there is a bit of hyperbole there, generally factories and other production centers will stay online in areas with stricter mandates. However, the industries which are hurting the most – small service sector businesses and brick-and-mortar retail – are the primary targets of economic relief given their disproportionate share of the workforce. So, since Tennessee’s service and retail businesses have remained open, local businesses can benefit from the conventional economic stimulus of measures like CARES and the recent bill.
Nationally, COVID relief exists in a strange catch-22 at the moment. In order for the stimulus provided by Congress to actually help the economy (and thereby working families), businesses have to be open, but when restrictions are relaxed to allow commerce to take place as usual, a resurgence of the virus will force state officials to clamp back down again on regular commercial activities. When this happens, basically no one can be helped by the stimulus Congress is providing because the businesses aren’t open to take the business of the people who benefit from government programs.
In order to cure the herky-jerky motion of America’s economic response to coronavirus, state and federal officials have to double-down on one path or the other. Either they are going to do a traditional stimulus, in which case the restaurants and stores need to stay open to actually receive the influx of cash. Otherwise, we are going to use a hunker-down approach: cut average Americans a substantial check to cover the costs of rent, mortgage, groceries, gas and other basic necessities for the next few months and shut everything down to starve the fire of fuel, so to speak. Hand-shakes and half-measures at this juncture will mean that more and more people will join the millions already slipping into poverty due to the pandemic.
Photo Credit / Associated Press
