Economists, politicians, and commentators are calling for more stimulus. “We need to do another stimulus package,” says Democratic economist Sandra Black. Maryland Governor Larry Hogan, a Republican, is calling for a state-level “stimulus.”
With the election behind us, much-needed additional stimulus relief is more urgent and achievable than ever. Today I wrote to Maryland’s congressional delegation urging them to prioritize a new stimulus relief bill in the lame duck session.
— Governor Larry Hogan (@GovLarryHogan)
November 16, 2020
The word “stimulus” is everywhere. And it’s the wrong word.
We don’t need a “stimulus” as we face a new massive coronavirus wave and ensuing lockdowns. We do need lots and lots of federal spending, but not to stimulate the economy. We need it as relief for the hardships imposed by the virus and the lockdowns.
Is this a semantic difference? Yes. Is it merely a semantic difference? I don’t think so. There are lots of different ways for Congress, the executive branch, or the Federal Reserve to hand out money, and which ones deserve the most priority depends on what you’re trying to accomplish.
After the financial crisis in 2008, there was a logic to President Barack Obama’s stimulus package. Businesses couldn’t get loans, and unemployment was high and climbing. Economists believed that injecting cash into high-leverage places in the economy, projects with a high “multiplier,” would “jump-start” the economy. A jump-start is a burst of power that allows the engine to start running on its own fuel supply. After you jump-start a car, you can detach the jumper cables and walk away.
Jump-starting isn’t what we need now. What we need is money to get us through the temporary lockdowns.
We’re not trying to juice anything, prime any pump. We’re trying to keep alive things that usually survive on the strength of the free and open economy, which won’t be free and open pretty soon.
In March, I called it “reparations”: “Governments are forcing businesses to shut down and telling customers and employees to stay away from the ones that are open. Governments are cutting off trade and tourism. The U.S. government and state and local governments are directly harming businesses in pursuit of a higher good. So, Washington ought to be talking about making it up to the businesses.”
Maybe restitution would be a clearer word. Kevin Glass likes to call it relief. Great: Restitution or relief is not the same as a stimulus.
People who lose work because of the virus and the lockdowns should get a check. Maybe the quickest way to “means test” this aid is to simply tax it.
A new Paycheck Protection Program would be great, in part, because it will keep people attached to their employer instead of simply to a federal welfare program, but mostly because we should be keeping small businesses from going under. I wrote last week about the need to save restaurants and bars — Congress should be covering their payroll and rent. We should do so for all small businesses.
Perhaps the greatest economic long-term damage of this next wave could be the permanent closure of tens of thousands or hundreds of thousands of small and independent businesses. This will harm our economy, but also our communities. And businesses closing imposes lasting, not merely temporary harm on communities and the businessmen themselves.
Get the money out the door. Don’t worry about stimulating the economy. During the lockdowns and the current wave, nothing will be stimulated. Just keep families from going hungry and businesses from going under until the wave passes. Then the economy will stimulate itself.