How much should the government “help” the economy during COVID-19? What should that look like?
You and I have witnessed some ugliness these last twenty years: “shovel-ready” projects, picking winners and losers in the energy sector. And Speaker Pelosi’s “big” idea for getting out of the 2008-2009 meltdown: pump out food stamps and unemployment checks.
That would have been paying people not to work, instead of getting people back to work.
Politicians are worse than most people at learning from mistakes. Let me suggest a basic approach to how we get through this.
History tells us that so-called stimulus plans usually fail. Remember Joe Biden predicting the ’09 “summer of recovery” after a nearly trillion-dollar stimulus?
What I do remember is how the administration made it rain for its favored targets: Medicaid expansion, “green energy” subsidies, “Cash for Clunkers”, illegal immigrant food stamps and huge grants to the National Endowment for the Arts. Yes, really.
Right now, every sector is getting hammered by coronavirus, and by the wise and necessary cessation of daily activities.
Picking which companies, or industries to prop up, which this President and the Democrats appear to be doing, is tempting. You could make the case for some of them, certainly better than the choices made in 2009.
What we are in is an emergency. What’s called for most obviously is compassion for people, first, not companies.
No one should face eviction or hunger because of a virus. Give emergency aid, with a firm end date, so that this doesn’t become a new entitlement.
By contrast, a “recession” is not unthinkable. Recessions are painful, but they are also periodic. They serve a purpose.
Economist Joseph Schumpeter had a theory called “creative destruction”. Simply put, as less-healthy or less-efficient businesses go under, they free up labor, capital, equipment, real estate, etc. that are then available to new start-ups. It’s Capitalism 101.
If government or central banks prop up unhealthy companies, they trade short term pain for worse in the future.
Yes, help people stay afloat and take care of themselves and their families with cash, for NOW.
Maybe identify key industries and producers whose vitality to our economy is indisputable. Loan to them. Very few.
No, do not conflate beating the coronavirus, which we must do, with beating a recession.
You are only kicking that can down the road.