... Meanwhile on the question of broader economic stimulus, several Republicans are now outflanking Pelosi to the left. On Monday, Senator Tom Cotton (R-Ark.) rejected the Pelosi bill as insufficient, while Senator Mitt Romney (R-Utah) proposed an immediate payment of $1,000 to every adult. On Tuesday, the White House released a massive $850 billion stimulus plan (which may get even bigger), including “$500 billion in a payroll tax cut, a $50 billion bailout for airlines struggling from plummeting demand, and $250 billion for small business loans,” Reuters reports.Even though these are big numbers, recall yesterday that Edmund Saez and Gabriel Zucman’s back of the envelope calculation was that the US GDP could suffer a 10% fall in GDP. Even Stephanie Kelton’s guesstimate that $2 trillion in stimulus was needed is light relative to that.
Moreover, more delay and more complexity leads to permanent damage. Even though the Administration claimed they’d get their $1000 checks out in two weeks, there’s no way that will happen between getting the legislation passed and the operational requirements of printing all the envelopes and checks and getting them out. In 2009, under an Obama stimulus program, the Federal government sent out 52 million checks, fewer than one expects here (presumably to ~155 million filers of Federal tax returns,1 since those are the addresses on hand; Social Security recipients are set up for electronic deposit, but they aren’t the group most in need). It took five months to distribute them, from May to October. One assumes there was also a sense of urgency then.And what does $1,000 per adult do? The average US mortgage payment is over $1,000, so for a couple, in most cases, housing costs will eat up a lot. It doesn’t take a lot of budget estimations to show that for most this money will support critical payments like housing, car expenses, the cell phone, perhaps student debt payments, for a month. It’s a very short term stopgap.
And even more important…that amount of money is chump change compared to paying any coronavirus treatment-related bills, and all we have from the officialdom on that front so far is empty promises. Look at an indicator of the costs even for those with insurance. From The Verge:
Someone with health insurance from their employer could pay $1,300 or more out of pocket for treatment if they’re hospitalized with a severe case of COVID-19, the disease caused by the novel coronavirus, according to one analysis. Health researchers based that prediction off of the costs associated with hospitalization for pneumonia…
Rae and his co-authors analyzed a database of insurance claims for people enrolled in employer insurance plans. They found that the total cost of treatments for people on those insurance plans who were hospitalized with severe pneumonia with complications was, on average, around $20,000 — though it ranged from around $11,000 to around $24,000. Insurers covered most of that cost, but the out-of-pocket expense for most people usually reached or exceeded $1,300.And for those who have jobs or a bit more of a cushion, a lot will be saved. It was for the most part in 2008 when the Bush Administration also launched a stimulus package that included sending checks of up to $600 to individuals, $,1200 for couples, and an additional $300 per dependent child. Even thought there was more to spend it on at that time (shops and entertainment venues were open), that was also a juncture when it looked like the economy might collapse into a depression. From The Balance:
The Bush Economic Stimulus Package didn’t have the impact it should have. A 2008 survey found that only 20% of those who received checks spent them. Another 32% put the money into savings. The rest use the checks to pay off debt.In other words, while saving people from bankruptcy or living on the street is a worthy goal, stimulus this ain’t. It’s a band-aid over the gunshot wound of business closures, job losses and pay cuts.
And loans to small businesses? Are you kidding? What small businessman wants to take on more debt when he isn’t sure of his income or even business survival? A few who are in situations where they have genuine reasons to think the coronavirus impact on them is as blip rather than a body slam might take the plunge, but the rest? Fuggedaboudit. Plus the time and effort involved in getting together a loan application and the uncertainty as to if and when any money might be forthcoming are further stressors when someone is fighting for his commercial survival. A business owner hit by the coronavirus lockdown needs money to pay his bills now, if he still has a prospect of riding out months of the new normal, and that’s just not how these programs work.
by Yves Smith, Naked Capitalism | Read more:
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[ed. Yes. $1000 or even $2000/person is a panic, drop in the bucket solution (For each family member, or per family? For millionaires? One time? Monthly?). A better solution, if we have to go with something like this (everyone is apparently a socialist now) might be what China is doing - time sensitive coupons/vouchers that have to be spent within a certain time-frame or risk becoming useless. See: More of China’s local governments, companies resort to coupons to boost flagging consumer spending (South China Morning Post).]
