A once-in-a-lifetime sea change is upon us, in terms of a health crisis simultaneous with an economic collapse. Who could have predicted this?
Actually, there probably are some academics and disaster planners who’ve done so, but no one wants to pore through those three-hole-binders full of numbers and graphs. I think writers Michael Crichton and Scott Burns were some of the exceptions, and they made a whole bunch of money scaring the bejeezus out of moviegoers.
Now that we’re in the middle of such a dual-whammy catastrophe, all manner of ideas have been floated as to how we extricate ourselves. The immediate reaction is, of course, to save our lives, and everyone has pitched in, even our President…belatedly and with misgivings.
As morally reprehensible as it is, the proposal that America should focus on repairing the economy at the cost of, perhaps, millions of people still lingers in the minds of some. As I mentioned in “Productivity”, some argue that we should just let the virus epidemic run its course: enough of us will survive to carry on, and the economy can recover much swifter.
President Trump can’t advocate for this outright, because he’d appear to be a ghoulish Scrooge in an election year. However, he’s dropped plenty of hints that he wants the economy re-started much sooner than his medical experts are telling him it would be prudent. It is apparent from his Tweets and public speeches that jobs and money motivate him a lot more than his concern for health and family.
The $2 trillion “lifeline” bill that Congress just approved is just that: a life preserver thrown overboard to help our drowning economy. This is the second bailout bill, as I recall, and there will undoubtedly be several more until things have calmed down… or the U.S. Mint printing presses run out of ink.
A huge problem that we face, moving forward, is how easy it is for politicians to simply throw a bunch of money at a problem, as if that will solve short- and long-term problems.
It used to be that Democrats were accused of employing this gimmick too often (hence the term, “Tax and Spend Liberals”). Lately, those same “Tea Party” Republicans have been joyously taking potshots at Presidential candidate Bernie Sanders and Congresswoman Alexandria Ocasio Cortez for their “socialist” money-spreading ideas. Robbing from the rich, giving to the poor…that’s preposterous, they say.
Of course, the first thing the G.O.P. did when Trump took office was to enact a “tax cut”…which was financed by debt (i.e. newly-printed greenbacks), not by a reduction in the Federal budget. Some wags referred to this budgetary flim-flam as “Borrow and Spend Conservatism”.
And, then they gave most of the tax cut to the wealthy. So, robbing from the Nation to give to the rich…is the new G.O.P. model.
Which is worse?
I mention this because in the past two months our government has approved approximately $3 trillion in “lifeline” funding for the economy, and experts (and non-experts in the Administration) indicate that there will be additional funding bills forthcoming. Let’s just say that, by the time the pandemic is over, the U.S. government funds $5 trillion to help the economy. It could, and probably will, happen.
As Senator Everett Dirksen said, “A million here, a billion there and pretty soon you’re talking about real money.” It’s so easy when you can print the stuff yourself.
By the way, where does that money come from? Of course, the U.S. Mint will print it, but how does it happen?
Well, America will borrow from rich people and countries, who will invest in Treasury notes. So, the U.S. will owe a lot of money. The total amount of debt obligation is called the “National Debt”, and our government will be obligated to fund annual payment on this debt in the Federal budget.This, of course means that there will be less budget pie to split among the many needy functions of our government.
There’s really “no free lunch”; we, our kids, and their kids will have to pay for these Federal giveaways (or, investments, if you prefer) down the road…in lessened government services.
That’s a significant downside to the new Trumpian model of “borrow and spend”.
The other downside is that it’s damned easy to govern in this way. If someone has a problem, give them money. If an industry has a problem, give them money. If you’ve got an election coming up, give voters money.
It’s particularly easy for politicians to do this when the money seems to be “free”. Just like households get over-their-heads with consumer debt…spending with the plastic can be habit-forming.
I worry that “borrow and spend” could become a bad habit. Let’s hope it doesn’t…for the sake of my grandkids.
By the way, no one is mentioning another way to deal with the crash of the economy: do nothing.
I can hear my sister Kellie now: “OMG, what are you saying, you heartless asshole. My 401K will go to Hell!”
Not that I am arguing for it, but just like the guy who proposes that we “let the virus run its course” because maybe we lose 2.5 percent of our population…no biggie!…, what if we were to “let the economy run its course”…i.e. no bailouts, no lifelines… and let the chips fall where they may?
In other words, like true Conservatives like to preach, let the free enterprise system do its job. Survival of the fittest, you know.
Certainly, we could lose 2.5 percent of our businesses, or GDP, and live to see another day. And, we wouldn’t have to spend $5 trillion in borrowed funds. Yes, there might be fewer See’s candy stores, Ferrari dealerships, and expensive restaurants at our disposal, but we’d adjust, and life would go on. We could eat Tomato soup for awhile.
What I’m saying is, what if we were to “thin the herd” economically…just like what happened in The Great Depression (1929) and in The Great Recession (2009). Why is this economic disruption any different?
Here’s an example close to home: My son Jonathan had a cabinetry business in the Temecula Valley of Southern California in 2009…along with about 39 other such businesses. Business was good. All of the sudden, Shazzam!…all but seven of those cabinetry businesses went tits up, because Wall Street got greedy, the economy tanked, and the home remodeling industry collapsed.
There was no bailoutin 2009 for those cabinetry businesses; the economy adjusted. And, life went on. Jonathan transitioned into bookkeeping, and never looked back. Financially, he’s better off now than he was in 2008 before the shit hit the fan. The Lord works in mysterious ways.
(As unbelievable as it sounds, the only businesses who got some of that “free” bailout money in 2009 were the greedy and reckless banking folks who got the economy in trouble. That’s right: they were rewarded for their efforts. New yachts, $100 cigars, and $500 bottles of champagne at their favorite strip clubs. Go figure.)
My point is that a lot of borrowed money is going to be spent propping up businesses, employees, and non-working citizens, as well. Some of those businesses were not sound before the crash, but we’re going to help them anyway. And, some of the employees and non-working citizens were living beyond their means, and we’re going to help them anyway. And, a lot of people with bad habits, like drug dealers and addicts, scam artists, and worse are going to get their hands on a portion of the Federal greenbacks that will be flooding America. And, strip clubs will be bailed out, too. Let the good times roll…with borrowed money!
Wouldn’t it be novel, though, to take this crisis and create something new and good out of it that spends this “free” money wisely and benefits our progeny who are going to pay for it?
I’m just thinking here, but the “G.I. Bill” might be a good example.
This was one of the tools that emerged after World War II to super-charge the American economy. We had a few million men returning from war who wanted to help America be all that it could be. Our government made funding available to educate those soldiers so that they could contribute more to society and the economy.
The program was a fantastic success, so much so that it continues to this day: if one serves in the military, that person becomes eligible for educational funding. It would be hard to think of another Federal government program that has earned such dividends to our country.
I finished college on the G.I. Bill. So did my nephew, Adam, who got a law degree and was hired by the F.B.I. Rocket scientists who got their education via the G.I. Bill helped put Neil Armstrong on the friggin’ Moon!
What if we used some of our suddenly-available, borrowed treasure to educate job seekers (and there will be millions of them in the next few years) in fields that our economy really needs, like engineers, health care professionals, computer technologists, etc.? Instead of spending money to re-create an economy that, to some extent, is aging and becoming irrelevant, we fill the holes to become more competitive in the global economy.
Being competitive is crucial in today’s economy. If we want to Make America Great Again, then we need to stop whining about the Chinese stealing “our jobs” and out-compete the sonsofbitches. Education is key.
Unemployed cabinet makers could transition into robotic tech engineers who might develop factory assembly lines for producing N-95 masks, for example. Or, cheaper ways to make toilet paper…since we seem to need so much of it. Or, a la the Herbert Hoover promise, “A Chicken For Every Pot”, perhaps Trump could promise “A Bidet For Every House”. (Then, there would be less excuse to hoard T.P.!)
It’s something like this, a bold idea, that our President could come up with to change his image, win re-election, and cement his legacy as a significant and thoughtful leader who’s thinking long-term in our interests.
He could call the funding Make America Smart Again (M.A.S.A.) Grants, or the Trump Bill (he’d like that!), and say that he thought of it. It would be okay with me.
Heck, I might vote for him.