There may or may not be another huge, expensive coronavirus relief/stimulus spending bill — who knows how much Congress will hand out in election season? But there shouldn’t be any more economic spending bills from Congress — we’re done with that now.
There’s a perfectly respectable argument that in the middle of a deep recession, we should throw money out there to prevent it from becoming a depression. That argument may not be to everyone’s taste, but it’s a reasonable one, at least. But once it has achieved the main goal, preventing that depression, it’s time to stop.
One reason is simply that money is not infinite. Either we eventually pay all that borrowed money back in future taxes, or if the government just decided to print more money (using that “modern monetary theory” free money tree), we have to suffer the subsequent inflation. So, spend what must be spent to stop a depression, and then stop. Don’t continue blowing out the deficit, as Congress would do if it decided to do another big spending bill.
The Atlanta Federal Reserve tells us that this quarter’s GDP is likely to be a near 30% boost. That’s as fast as the economy (America’s or pretty much any other country’s) has ever grown. Sadly, because the laws of math are not breakable, a 30% increase from a smaller number doesn’t make up for the earlier, 30% decline from a larger number. The economy will still be about 9%-10% behind where we were in February. The good news is, some of this will be made up later in the year.
But some of it won’t be because the economy has changed. Social distancing means that some jobs just won’t be done anytime soon, or perhaps by so many people. Some face-to-face retail will now be online. Some stagehands just never will have shows to hand or stage. More jobs will be in warehouses, or streaming, or something we haven’t seen yet. The structure of employment is going to change in ways that we’re not quite sure of. Yes, some people will have an unhappy time of it, but this is what can be called a “recalculation” recession.
People need to move their method of making a living from the old to the new ways. It’s just like people in manufacturing have had to do in recent decades. As Steve Jobs once said to President Barack Obama about factory work making electronics, “Those jobs are never coming back.”
So there’s no point in trying to support those old jobs and companies, they’re dead. There’s also no point in another big spending bill because that doesn’t smooth the transfer of labor across industries. Certainly, we don’t want more stimulus checks, as the latest research shows most people just saved the money. That doesn’t produce economic stimulus. Likewise, expanded unemployment insurance just keeps people waiting and waiting on welfare instead of changing the type of job they look for.
Fortunately, workers changing industries is something the American economy has always been exceptionally good at. Flexibility in the labor market means that moving millions of people from dead jobs killed by social distancing to new ones will be easier in the United States than in any other large economy.
Yes, it sucks, to put it mildly, for those who have to do it, but it’s the least-bad solution. People are simply not going back to cramped theaters to have performers sing on them anytime soon, so some people will have to find new kinds of jobs. As someone who has already done this twice in my working life so far, I’d also say it’s not that bad a thing to have to do.
Avoiding a depression and turning the economy back toward the right direction has already been solved. Now, we’re at the part where the world has to adapt and make long-term changes. Like most problems, it won’t be fixed by just throwing money at it and exploding the deficit even further. So Congress just doesn’t need to, does it?
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at the Continental Telegraph.
