Aid to Businesses, Not Wish-List Leftism, Is Economic Solution to COVID Crisis
By Jack Kaplan '22
The COVID-19 pandemic has had a wide range of consequences across the globe these past few months, including a catastrophic effect on the U.S. (and global) economy. The combination of practices of social distancing and sheltering at home, coupled with closures of non-essential businesses, has led firms to see sharp decreases in profits. State governments have closed down all types of businesses, causing the economy to falter and millions of jobs to disappear. Politicians on both side of the aisle profess to understand the urgency required for implementing policies that will save the economy while also taking care of their constituents; however, because bipartisan support was necessary for the stimulus package to pass both chambers of Congress, the package looks like a mish-mash of different policies that are insufficient and expensive. The package includes the expansion of unemployment insurance, forgivable or government guaranteed loans for small businesses, bailouts for large industries that are suffering (e.g., travel and hospitality), aid for state governments, and direct payments to tax-paying adults. The package cost the government more than 2 trillion dollars, but there will inevitably need to be more stimulus bills passed as the funds quickly run out and the pandemic continues.
The major fault with such a bill is that it prioritizes its goals over financial responsibility. The U.S. government is not a bank with unlimited funds, but rather it is an entity that was already running on a trillion dollar budget deficit before the crisis. Spending an exorbitant amount of money without provisions for recovering the majority of the funds is simply irresponsible. The goal of the government at this point in time should be to spend the least amount of money possible in a way that still keeps the economy afloat so it can bounce back following the crisis. The policies that the bill implements are inefficient and could cost the government more than 10% of the national GDP.
As part of the next bill, Democrats want to expand the length of time a person can claim unemployment insurance and increase the dollar amount of payments made to claimants. While changing the time limit is understandable as the crisis could last for a long time, increasing the dollar amount of payouts is unrelated to the coronavirus. Someone that was unemployed two months ago made the same amount of money that an unemployed person makes today: $0. The federal government’s supplement to unemployment insurance has increased the average weekly payment for those that have been laid-off to $978, a greater amount than about half of full-time employees earned before the pandemic. It seems like common sense that people who lose their jobs should not effectively receive a pay raise from the U.S. government; becoming unemployed due to the pandemic should not increase someone’s take-home pay. In examining these increased benefits, it appears that Democrats are taking advantage of the current situation to try to enact policy change they have wanted for a long time.
Direct payments to citizens are also problematic. The unemployed would already be receiving payments from unemployment insurance, and those that have jobs already have a source of income. The checks may make people more comfortable, which is admirable, but not the government’s job. More importantly, this money will never be repaid, so the government would lose billions of dollars on a plan that is unnecessary.
Although it is unappealing to give money directly to businesses instead of people, the best way to save the economy and to care for the people is to loan money to businesses. Firstly, the loans would allow for businesses to continue to operate, resulting in more people remaining employed and the government paying out less money in unemployment benefits. This would create a cycle where people would spend more money and allow the economy to prosper. Secondly, the loans would ensure that the government is able to recoup the funds it spends. The economy will bounce back after the crisis, and at that point businesses can repay the government, something that would be unachievable if the money were given to individuals. The loans included in the package do not require businesses to repay them if they continue to pay their employees, making them bailouts rather than loans.
It seems obvious that something needs to be done to aid average Americans during the pandemic. By loaning money to companies, employees can continue to earn wages, thus alleviating the need for direct payments and reducing the number of unemployment claims, both of which would save the government massive amounts of money. There are plenty of businesses that can operate throughout the pandemic, and the loans would be cost-efficient and the only solution that will permit both the economy and the people to prosper without bankrupting the federal government.