John Maynard Keynes, the foremost economic father of modern liberalism, argued that governments should spend against the wind, building economic surpluses in times of growth so they could splurge during crises. While conservatives have griped at Keynesianism in practice, the coronavirus has proven itself a specifically pristine example of where this principle ought to be applied.
Unlike during the Great Recession, which was arguably created by regulatory overreach allowing for the mass proliferation of subprime mortgages, the coronavirus can only be solved by government intervention. From border closures to the mass deployment of federal funds, every step of our approach requires executive action. But most importantly, the government must incentivize a behavior the market specifically punishes.
In order to grant us the time to ramp up testing and treatment development, the nation must engage in social distancing, shutting down schools, workplaces, shopping centers, and recreation. To save the planet, we’re asking people to forgo their paychecks for the time being. With such perverse incentives, here the government has a role.
Republicans have rallied around the Trump administration’s plan to administer direct cash payments to individuals, not under any guise of mass stimulus, but simply to help the immediately unemployed survive under the onerous demands required to beat the pandemic.
From a public health perspective, a cash bailout is a necessary solution. From a moral perspective, it’s the only solution. But contrary to the advice of Keynes, we haven’t spent against the wind. We’ve simply spent ourselves to exhaustion, racking up $22 trillion in national debt with our annual deficit slated to cost at least $1 trillion indefinitely. After over a decade of monumental economic growth, we don’t just lack a rainy day fund to bail us out of this crisis — we already have 22 trillion tons of debt weighing us down.
Although medical experts have focused on our immediate need to quarantine ourselves, vaccine development will likely take more than a year, meaning that unless we perfect herd immunity among the young and watertight quarantining among the elderly and the immunocompromised, we could spend months, if not the rest of 2020, begging workers to stay inside sans paychecks and increasingly penniless.
Trump has requested $500 billion for an immediate cash bailout to individuals, but that will only get them partway through May. The total figure required by the federal government when all is said and done will likely be orders of magnitude greater than that.
If we did spend against the wind, if we had reformed Social Security and Medicare during a decade of ample growth, the notion of spending more than $1 trillion on immediate cash relief would be unremarkable. But we’ve buried ourselves in a debt bomb ready to explode thanks to extraordinary increases in entitlement spending and interest piling up as a result. Now we’ve been forced to parse through dollars and cents during the one moment the government is supposed to splurge to save us all.
For once, conservatives must admit that Keynes was right sometimes. But both parties, if they’re willing, will only realize it too late.
