Should Congress spend $2.2 trillion dollars on the new stimulus plan?
- There have been 7.2 million coronavirus cases in the United States, with 205,372 deaths.
- For the first wave of stimulus checks, individual taxpayers received $1,200 each if their income was less than $75,000. Married couples received $2,400 if they earned less than $150,000.
- Republicans initially proposed a $1 trillion package as a starting point in contrast to Pelosi’s $3 trillion House-passed plan.
- As of September 29, Democrats proposed a new $2.2 trillion bill that includes another round of $1,200 stimulus checks, $2,400 per married couple, plus $500 per eligible dependent.
Congress should not spend an additional $2.2 trillion on a new stimulus plan, based on the experience of the one it passed in the spring. A stimulus plan should be focused on measures that preserve the US production capacity (like increasing our GDP). Funds should be targeted to businesses to replace wages, support debt service, and pay the rent on property, plant, and equipment.
Instead, the proposed stimulus plan calls for extending the $600/week unemployment benefit to 2021 for a record number of recipients and making it retroactive to September 5th. This emphasis on keeping workers at home and unemployed has unintended negative consequences; namely, it keeps workers dependent on the government and makes them less inclined to seek new employment. Moreover, it stunts economic growth and reduces government revenue in the form of corporate and individual income taxes.
The current stimulus plan under consideration calls for nearly half a trillion dollars in state and local aid. The stimulus plan passed earlier this year contained money for bureaucratic overhead, foreign aid, and quasi-government enterprises like Amtrak. I'm sure we can expect more of the same in the plan currently being negotiated.
Spending an additional $2.2 trillion on a stimulus plan will explode the 2020 Federal deficit to $3.3 trillion, which will result in historic levels of debt that will be shifted along to many future generations to come. Any additional expenditures in a stimulus plan should be responsibly tied to efforts to reopen our economy, not tied up in government spending, as the current draft seems determined to do.
Comparing the US economic response to that of European countries showing how the money is spent is perhaps as important as the numbers involved. The original funds from the CARES Act were supposed to get Americans through the pandemic but ended up doing more to help the rich than average citizens. As Chema Vera, executive director of Oxfam International, said, 'COVID-19 has been tragic for the many but good for a privileged few.'
An estimated 30-40 million people face eviction in what experts are saying could be 'the most severe housing crisis' in US history. As early as July of 2020, over 30% of Americans reported being unable to pay their rent or mortgage. Unemployment numbers also remain 'historically high,' and although some people have returned to work, the decline in numbers also reflects the fact that benefits have run out for others who are still unemployed. Yelp data shows that 60% of business closures due to COVID-19 are now permanent, suggesting that the employment situation is not likely to improve any time soon.
One of the biggest arguments against spending more on pandemic stimulus is coming from conservative deficit hawks. However, the data suggests that this is not a valid concern. As Saagar Enjeti pointed out on Rising, recent numbers show the largest decrease in inflation since 2008. As the hosts go on to discuss, in times such as these, deflation can actually become the problem due to consumer spending dropping off.