- The US share of global GDP is nearly 15%. If our economy can’t stabilize and then recover from the coronavirus pandemic, it will be harder for the world to do so.
- And so it’s imperative that Congress write fair, generous legislation to get us through the economic shutdown required to fight the virus.
- But that isn’t what’s happening. Republicans accuse Democrats of not moving fast enough. Democrats accuse Republicans of short-changing American workers and favoring big corporations.
- That matters. Under-funding this stimulus will drag the global economy down. And any appearance that corporations are getting a more fair deal than individuals will make people not want to comply. A lack of compliance will drag on the crisis.
- This is an opinion column. The thoughts expressed are those of the author.
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The US economy contributes more than any other country to global GDP — about 15% of the total. When it falls into ruin, the entire global economy drags. We saw that happen during the financial crisis of 2008.
So it is imperative for the world that the US economy stay stable during the coronavirus pandemic, and that it can swing back to growth as soon as possible when it’s over.
Right now there is one clear obstacle to that: the potential that Congress could under-fund the US coronavirus stimulus package. If they do, they put not only the economy but the effort to fight the virus at risk.
This is a case where the consequences (and possibility) of overspending are basically negligible, while the consequences of underspending could push the entire global economy into a longer, deeper recession.
And yet this weekend the Senate was unable to pass aid legislation. Senate Leader Mitch McConnell raged and blamed Democrats, while Democrats fumed over the legislation’s $500 billion, opaque Treasury slush fund to be handed out to corporations at Treasury Secretary Steve Mnuchin’s discretion. Treasury wouldn’t have to report which corporations got that money for half a year, whereas during the financial crisis companies that received funds were made public within 60 days.
Democrats also rejected the bill over a lack of labor protections that would only mandate corporations keep employees “to the extent possible.” They want more limits on executive compensation and share buybacks, and they want more money for healthcare workers. They accuse Republicans of being cheap, and writing a deal that favors corporations over average Americans.
You can’t be cheap, and you can’t be corrupt
St. Louis Federal Reserve President James Bullard on Sunday scared the pants off a lot of people by saying unemployment could hit 30% during the coronavirus. He also said the economy would take a $2.5 trillion hit. But he asked people to look at government efforts to get us through this not as an effort to stave off recession, but as an investment in public health. He’s right.
“You want capital to just sit in place. Switch off the factory … Then switch it back on,” he said.
That means treating individuals and businesses with extreme generosity. To the Democrats, the Republican bill is far more generous to corporations than workers. Particularly by allowing them to fire people while still taking bailout money.
The only proposal that comes close to being generous enough for individuals comes from Democratic Rep. Rashida Tlaib. It would give a prepaid card with $2,000 to every American. That card would then be recharged with $1,000 monthly until one year after the end of the coronavirus crisis. This is the kind of plan that will make Americans believe the government has their back, not just the backs of big corporations.
Because you see, even a whiff of that kind of impropriety puts the entire global economy at risk. It is imperative that it be a fair deal.
The distrust that is bred by corruption will make it much harder to fight this virus, potentially dragging out the crisis. The vast majority of Americans already think that our lack of trust in each other and our government makes it hard to solve problems, according to Pew Research. If Americans feel like this whole aid package is a handout to big corporations — which they also distrust — they may stop listening to authorities.
After all, why should they respect a government that seems to have so little respect for them?
A lack of compliance would draw the crisis out only longer, bringing waves of the illness that will require mini-shutdowns to stabilize hospital capacity. Goldman Sachs estimates that the recession brought on by fighting off coronavirus will trough in April, knocking 10% off US GDP. Over time, bank analysts wrote last week, the economy should begin to grow again incrementally. How fast depends on how well Americans comply with government social-distancing mandates. Americans have to want to comply.
I’ve said this before and I’ll say it again: This all needs to move much faster. Small and midsize companies make up 83% of the US economy, and thousands of workers are already out of a job across the country. Means-testing initial payments to individuals — that is, restricting who gets the checks based on income — is a waste of time.
Let me put it this way: If you think that the 1% shouldn’t get a check, then that means we wasted 1% of these aid funds. That’s better than creating massive financial stress for millions of Americans and their families.