Past attempts by the federal government to “save the economy” have (at best) failed to achieve their goals and (at worst) exacerbated crises faced by the nation. In addressing the economic strife America now faces, policymakers must recognize the critical uniqueness of the novel coronavirus and learn from past mistakes. This means providing support to those in need but not bringing about a sort-of Trump New Deal that would expand entitlements.
This time really is different. Both the Great Recession and the Great Depression resulted from deeper, underlying issues in the economy. These challenges were often precipitated by years of faulty federal policy, such as the financial crisis of 2007-2008, and brought about the recession because of those underlying issues. President Barack Obama’s 2009 stimulus package didn’t help boost economic growth, and there is clear evidence President Franklin Roosevelt’s New Deal prolonged the Great Depression and made it even deeper than it would have been otherwise.
Today, conferences have been canceled. Elections and political party assemblies are being postponed. Air travel is drastically reduced. Mountain ski resorts have been shut down. Most restaurants, bars, shops, and schools are closed or limited operations. In some areas of the country, shelter-in-place punishable by law is in effect.
What’s happening to businesses and workers suffering due to the sudden economic shock isn’t the result of an incentive structure warped by years of bad policy, nor from systemic problems. The economic crisis stems directly from government edicts intended to prevent a viral pandemic from becoming uncontrollable.
As a result, those out of work in the food-service, travel, hotel, energy, and other industries may find it impossible to secure alternative employment. This is the most significant issue, as individuals who aren’t working or are on hiatus are severely limited in what they can do to meet their needs.
It is sensible to provide some short-term relief for the unemployed. But the critical question is how that relief is accomplished.
President Trump and Congress must be strategic, targeted, and short-term in whatever measures they take. Washington and individual states alike must not establish brand-new, expansive schemes that would inevitably or likely be made permanent, such as the proposed universal basic income or an unfunded paid family leave mandate placed on small business. (Even a funded paid family leave mandate is questionable.)
Moreover, Congress must not authorize another Roosevelt-style New Deal or another hodge-podge “stimulus” boondoggle as Obama did. Shovel-ready, government-guaranteed jobs are never viable. You might as well give everyone spoons and have them start digging holes for pay. This crisis also doesn’t justify “Medicare for all” or forgiveness of student debt.
Instead, we should help people get through what is likely a broad and intense, yet short-term, pain brought on by the government’s response to a deadly, fast-spreading virus.
Republican Arkansas Sen. Tom Cotton’s general proposal to put the unemployment system to work on the COVID-19 virus offers one approach. Rather than a universal basic income, Congress should expand unemployment benefits on a temporary basis to workers who have been furloughed or laid off due to the pandemic. To cut through government red tape, these workers would receive employer verification that their changed situation is tied to the economic crisis.
Low-interest or no-interest small business loans would help small businesses and self-employed workers struck hard by this crisis. If businesses need to shut their doors, they will, and workers will get a lifeline. If businesses cannot shut their doors, they will keep the lights on. These programs could be renewed by Congress monthly as needed.
Keep in mind that in past economic crises, the poor could at least go to soup kitchens to receive support. That is being severely curtailed now due to public health concerns about sharing the virus, resulting in far smaller crowd sizes allowed. We should not look at the next 2-3 months as being the same as past recessions or economic malaises. This is a unique circumstance requiring targeted, timely, and short-term actions.
The United States now faces a genuine crisis. It is something everyone must take seriously. But we must also beware calls to grant more “temporary” emergency powers to the president and Congress for a supposedly safer and more secure society.
Trump likes to brand his name on everything he can. “New Deal” is not something he should add his name to. However well-intentioned the policy, to drag the nation down such a path under the guise of “saving the economy” is a dangerous proposition.
Jimmy Sengenberger is the host of Jimmy at the Crossroads, a new web show in partnership with the Washington Examiner that focuses on the intersection of politics and economics. He is also host of The Jimmy Sengenberger Show on Denver’s News/Talk 710 KNUS.
