COVID-19 Teeter-Totter: Balancing Our Nation's Health and Wealth
Will the CARES Act help us avoid a recession? The more pertinent question should be, will the CARES Act help us avert a deep, more lasting depression.
Please indulge me, but today’s blog borders on being a rant…in response to a question posed to me by several inquiring minds and my webmaster: Do you believe the $2 trillion government stimulus bill is enough to avoid a possible recession in the near term?
The CARES Act
Let me first mention the obvious. Our country has a huge and growing liquidity problem – business and personal – forced upon us by government. This necessary legislative action immediately created a burdensome nationwide cash crunch due to loss of income whether salary-related or bottom line induced. Question is, will this so-called stimulus bill, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) avoid a near term recession?
Recession… or Depression?
No, in my opinion. I fear that a near term recession is already upon us.
You don’t shut down 60-70% of a national economy for weeks and months without inflicting damage. The more pertinent question should be, will the CARES Act help us avert a deep, more lasting depression? In that regard, I’m more optimistic… that the Act might at least stabilize the economy, if not immediately bring it back to health.
What I personally most crave, however, is a “flicker of light and hope” at the end of my tunnel to strengthen this optimism… as I think most Americans do. Our leaders have some difficult decisions to make – tough, gut-wrenching decisions – balancing the current need to “shelter in place” (to flatten the inflection curve) against the necessity for our country to “get back to work”. The CARES Act in all its trillions of dollars of glory has the potential to financially bridge the gap from one task to the other. But it’s a tottering bridge with many, yet ill-defined underpinnings. No question, the CARES Act lends a vital element of financial aid to many important aspects of our economy, and we can only hope that it’s enough. Still, America’s amazing and successful history didn’t just happen by writing checks. In all of our country’s previous and defining challenges, it required – and received – timely leadership; leadership that successfully rallied the support of a questioning but resilient citizenry… an industrious citizenry always eager to go back to work.
I personally am encouraged by our President’s wise delegation and proper distribution of the Coronavirus War’s daily operational authority to Vice President Pence and the Whitehouse Task Force’s highly competent scientific and administrative experts. I’m heartened by his unending and deserved praise of state governors and local leaders. I’m encouraged by his heartfelt recognition of thousands of that brave frontline force of doctors, nurses, medical staff, emergency personnel, factory workers, supermarket clerks, and other essential private sector employees who daily risk contagion to keep us healthy and well fed (and supplied with toilet paper). I am encouraged by his relentless support of the nation’s confidence in itself – a confidence so necessary if we are to emerge from this medical catastrophe to the worker-bee society we’ve always been.
Growing Our Government
There are always reasons to criticize a sausage-making legislative action as massive as CARES, larded with unneeded doses of what many consider wasteful spending on matters unrelated to the coronavirus – a quarter of a trillion dollars of payments to Americans whether or not they are affected by the virus. Is it really that difficult to determine who is not affected by this scourge?
And how about the unemployment insurance premium beyond 100% of wages lost. Do we really need additional incentives in this country for people not to return to work? Mark my word, the $600 weekly bonus on top of normal unemployment insurance will slow our economic recovery.
The federal government is giving millions of people a raise merely for losing their jobs. In short, when businesses finally start to reopen, they will be competing with Uncle Sam for employees… because those unemployed bonus recipients will be earning more by remaining idle. Why rush back to work? And why do we reward…without oversight and with no strings attached… certain federal, state and local government agencies who’ve long been known for mismanaging their budgets? And how about that oft-mentioned $25 million Performing Arts stage to nowhere – the Kennedy Center “virus relief”? Some say the biggest recipient of CARES largess, over $600 billion, is government. The list of goodies are too many to cite, but they collectively act as a major expansion of the welfare state. As usual, the swamp writes off Washington transgressions as “Oh, well, it’s just Congress being Congress." Ah, politics. Sometimes I truly wonder if we are “the best of the worst."
I’m hopeful that the $2 trillion CARES Act will be adequate enough to avoid a deep depression, but the ride is going to be bumpy, indeed. What I’m really hoping is that our President and his team will continue to exercise the kind of leadership they have demonstrated in recent weeks sufficient to avoid a more serious economic setback than the aforementioned recession. The key will be, despite its wasteful propensities, this bridge of financial assistance so necessary to getting our people back to work by providing needed funds for medical supplies to hospitals, ventilators for patients, personal protection equipment for doctors and their staffs, liquidity for businesses whose revenue streams have been disrupted or eliminated by The Great Lockdown, the Treasury’s nearly half-trillion dollar Exchange Stabilization Fund to backstop the Federal Reserve’s support to credit markets and individual companies (capital used to leverage trillions of dollars in loans to larger companies (loans, not grants), and $400+ billions in loans to small businesses with fewer than 500 employees (portions of these loans devoted to payrolls would be forgiven if the workers aren’t laid off).
If you’ve managed to stay awake while reading through that last paragraph, you will quickly understand that the CARES Act is no panacea for a swift and clean recovery. Much damage has already been done by this nasty virus. Layoffs will likely continue, and weaker businesses will continue to declare bankruptcy. We can only hope that, given the time this bill provides, our President, his team, and the states’ governors will provide the leadership necessary to pivot to an effective “back to work strategy” that will lead us to a full recovery. And if they provide that inspirational leadership – and hope – to all of us, with our help, we will be successful.
Unwinding the Damage
And finally, let’s hope that after this horrific coronavirus moment passes, those in charge will at least try to distinguish between the temporary and permanent expansions of government codified in the CARES Act. The virus will have done enough damage to our country. We shouldn’t let it be the reason for a $600 billion permanent government power grab.