With the latest round of stimulus in the books after a bit of a head-fake from President Trump on a veto, we may not see another major package. That is somewhat dependent on the outcome of the run-off Senate elections in Georgia, but even if Democrats win both of those seats, another major package may be tough to get through the Senate. Still, let’s take a look at what has worked, what hasn’t, and what kinds of fiscal action are called for in a major economic downturn like this. The one-off check that Trump bluffed a veto over expanding, for example, is not a particularly effective method of stimulus. Expanding the unemployment program, however, keeps people afloat who suddenly find themselves in a much more difficult situation than they could have expected. The Paycheck Protection Program, despite its initial popularity, continues to be a deeply flawed program. Bailouts to large, publicly traded companies served only to delay the inevitable or prop up ineffectual management. State and local government, meanwhile, was left out to dry despite being the country’s largest employer.
Many of the mistakes that were made in the rush to get something out the door could have been corrected after we had more time to evaluate their effects, but they were repeated. Media coverage has centered on a small aspect of both the original stimulus bill and the new one while more important aspects are scarcely mentioned. The $1,200 check in the first one and the $600 check in the second will do very little to help someone who suddenly became unemployed and is superfluous for people who were able to just work from home. Frontline workers, meanwhile, probably could have gotten by with enhanced access to medical care and testing. I thought the first check was a good idea because I nearly always think people are the best judges of what they need and cash is the best way to let people make their own decisions. When the data trickled in, though, it showed that people socked that money into savings for the most part. Since the goal was stimulating economic activity, we can say with a high degree of certainty that that check did not have the intended effect. Given that data, the best idea would have been to change the approach to either split the checks into installments or put that money into expanding other things that we do know are accomplishing the goal of stimulating the economy rather than just sending out a splashy check.
The largest single part of the legislation is an expansion of the Paycheck Protection Program, which makes up roughly a third of the package. We already saw that a large portion of that money went to companies and people that were not using it for its intended purpose – to keep people employed. Many large corporations were able to successfully apply for those loans and others just used it to defray costs. If a company would have to lay off their employees but for a loan, there’s a good chance they don’t have enough work or revenue at the moment to justify keeping them around. This, again, would imply that we have repeated a mistake for which we have strong data showing us the error of our ways. Instead of giving out these loans, we would have been better served by simply providing more resources to the unemployed and making it as easy as possible for companies to re-hire their employees when things return to some semblance of normal. The market (which is to say everyone) will always be a more powerful force than any government entity. As Jeff Goldblum famously said in Jurassic Park, “Life, uh, finds a way.”
The biggest mistake, though, is not about the somewhat ineffectual policies that were repeated. They aren’t perfect, but they are better than not doing anything. No, the biggest mistake was leaving out state and local governments. Together, they employ over 15 million Americans. With reduced tourism, less patronage of bars and restaurants, and less revenue from retail, state and local governments have been just as hard-hit as airlines. The airlines have been given billions in aid, though, while our state and local governments have been given very little from the federal government. Between February and July of this year, more than 1.5 million jobs in state and local government were lost. Despite the fact that people need the services of their local governments now more than ever, those services had to be cut back or suspended altogether. Not many people need to be flying right now and unemployment insurance could have helped airline employees stay on their feet. Millions of people, though, were unable to utilize essential services from their local governments.
This is not to say that the latest iteration of stimulus is a bad bill; we needed to do something and there are some great aspects of it. Schools, for example, will have a much easier time reopening safely with the influx of cash they will be given. The unemployment program that kept millions of people above water over the past year was renewed (albeit at a lower level). The point, though, is that we can do better. We should always work to improve where we can and it is disappointing that we did not use widely available data to make our government serve everyone better.