Do You Feel $9,000 Richer, Punk?
The bad policy and worse politics of coronavirus stimulus spending
As Congress squabbles over the next multitrillion-dollar phase of coronavirus relief, it's worth asking the question: Do you feel $9,000 richer since March?
Unless you were an early investor in the vaccine-chasing Moderna Therapeutics, the answer is likely "no." And yet the estimated $3 trillion price tag on the first four batches of COVID-19 stimulus, divided by 330 million increasingly underemployed U.S. residents, equals $9,000 per capita, which has ended up where government payouts usually go: to entities with better connections than you.
There was the $50 billion to airline companies—$25 billion in loan guarantees, $25 billion in grants—which promptly slashed worker hours while burning fuel on empty flights at the government's request. There were the concierge-service clients of banking behemoths Citibank, U.S. Bank, and J.P. Morgan Chase, who got to the front of the line for the feds' $349 billion loan program for small businesses. And don't forget the Federal Reserve, which is propping up Wall Street by doing what Fed Chair Jerome Powell recently characterized on 60 Minutes as "a multiple of the programs that were done during the last crisis."
You would think that politicians and other elites would have learned from their never-popular response to the 2008-2009 financial crisis. Back then, the bailout/stimulus combo averaged out to a little less than $7,000 per U.S. resident, not that normies saw much of it. With few exceptions, the money went toward propping up banks, socializing the losses of private capitalists, and backfilling the fiduciary irresponsibility of states.
If the federal government didn't pass a huge emergency bailout, then-President George W. Bush warned in September 2008, "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs."
Well, all of that happened anyway, as did the most anemic recovery in post-war history. As a direct consequence, so did populist anti-bailout political movements on both the right (Tea Party) and left (Occupy Wall Street). If the response to the 2008 financial crisis helped bring us Donald Trump and the rise of Sen. Bernie Sanders (I–Vt.), what might an even bigger and less effective response to the more injurious coronavirus bring?
"Millions of Americans are seeing that the government spent trillions of dollars and still didn't get it right," Rep. Justin Amash (L–Mich.) told me last month, during his brief flirtation with the Libertarian Party presidential nomination. "They didn't get help to the people who need it most. Instead, most of the assistance went to people who have great connections, who run big corporations. Those people, they got it really fast."
Why does this happen every time? As economists like to say, incentives matter. Sure, Congress could have just mailed us each a $9,000 check—or maybe $7,000, spending the rest on medical system capacity. But then the two major parties wouldn't have been able to go back to their favored and most supportive constituencies and brag about their special treatment. Sure, there might be an eventual backlash, but as President Trump once said (before COVID-19) about a future debt crisis, "Yeah, but I won't be here."
New York Gov. Andrew Cuomo (D), that inexplicable media darling, complained in a recent press conference that all these helicopters full of money—government spending in the U.S. has doubled over just the past two decades—hasn't managed to, you know, produce anything. "Every president has talked about the need to rebuild our infrastructure, our roads, our bridges, our airports," Cuomo said. "Our country doesn't build airports anymore….We haven't built a new airport in 25 years."
Governments, unlike businesses, have guaranteed (if fluctuating) revenue streams, in the form of taxes. The federal government has the added leeway of borrowing, apparently without limits. The more of GDP that gets soaked up and spit out by this process, the more that economic and political activity will be about directing and capturing the flow to line the pockets of bankers, corporate executives, and union bosses.
We can no longer build fancy bridges or even new subway stops, but we sure as heck can pad the pensions of transit employees and make sure the Lakers get a loan.
So what does Congress do for an encore? House Speaker Rep. Nancy Pelosi (D–Calif.) wants to double down on another $3 trillion. No, we'll need $10 trillion to stave off another great depression, they tell us in The Atlantic.
Maybe by the time they reach eleventy trillion, we might see more than a $1,200 check. But I wouldn't bet on it.
