Can We Avoid Another Massive Round Of "Stimulus"?

It was on March 27 this year that the so-called “CARES” Act (Coronavirus Aid, Relief, and Economic Security Act) became law — a $2.2 trillion federal spending bill, designed to bail absolutely everyone out of any and all downside risk from the economic downturn brought about by government response to the pandemic. There was virtually no opposition, with the bill passing unanimously in the Senate and by voice vote in the House. Since there was no new tax revenue associated with the bill, it represented approximately a 10% instant increase in the public debt incurred in the 231 years since the founding of the Republic. Whew! Was there any possible negative consequence to taking on this enormous amount of new debt, mostly just to hand out checks to anybody and everybody, whether they needed the money or not? If so, that subject was barely discussed anywhere. Hey, this was a “stimulus.” Everybody knows that when the economy is down, it needs a massive federal “stimulus” to get it going again.

Then, almost immediately after the CARES Act became law, the House started working on the next round of so-called “stimulus,” labelling the new effort with the equally idiotic acronym of the “HEROES” Act (Health and Economic Recovery Omnibus Emergency Solutions Act). This time the spending would total $3 trillion — because, after all, if the government had just gone out and spent $2.2 trillion to hand out checks to everyone, and the economy had barely begun to recover, then obviously what was needed was a still bigger and more extravagant “stimulus.” And how about adding another 15% or so to the outstanding national debt? Why should anyone be concerned about that?

But then the remarkable happened: the HEROES Act stalled in the Senate. It appears that that Republican-controlled body balked at some or all of the spending proposals. As reasons for the stalling, various news reports have particularly focused on the enormous size of the proposed spending, and also on a figure of some $875 billion intended to be handed over to state and local governments to cover whatever revenue shortfalls they may experience. Of course, this money would go predominantly to blue jurisdictions, since those are the ones with the worst overspending problems, and also the ones with the strictest lockdowns and sharpest revenue declines.

But whatever the reasons, it is now almost four months since the House first passed the HEROES Act on May 15, and the bill has still gone nowhere in the Senate.

Needless to say, the left-wing economists have been loudly declaring that a new blowout spending bill is absolutely necessary to get the economy going. Consider this roundup from Matthew Yglesias at Vox on July 25, headline “Economists say Congress should think big on the next rescue package.” Excerpt:

The economy could need trillions in support over a period of years. . . . “I think at a minimum we’re at $1.5 trillion,” Elizabeth Pancotti, an economist and policy advisor at Employer America, tells me of what we’d need to get us through the fall. . . . Other economists, looking toward a longer time horizon, put the number considerably higher, at $3 trillion or $4 trillion, or possibly even more.

After all, it’s just what we “need.” Or, if you are looking for the opinion that any opposition to another blowout multi-trillion dollar “stimulus” bill is just pure evil, look no further than Paul Krugman of the New York Times. As you probably know, in Krugman-world, all wealth comes from government spending, and the people have no ability whatsoever to provide for themselves. Here are excerpts from Krugman’s column of August 3:

[E]ven now [Senate Republicans are] refusing to offer anything that might significantly alleviate workers’ plight. . . . This is an astonishing failure of governance, right up there with the mishandling of the pandemic itself. But what explains it? Well, I’m of two minds. Was it ignorant malevolence, or malevolent ignorance?

And of course, the official view has been that the economic recovery will stall and falter without the massive new “stimulus.” From the New York Times, August 21, “Economic Data Points to Pause in Recovery as Aid Programs Expire.” Excerpt:

America’s economic recovery is in an uneasy pause, with key indicators of hiring, shopping and investment stalling or in retreat in the wake of a resurgence in coronavirus cases across broad sections of the country, and with Congress and President Trump showing no signs of progress on another stimulus deal.

So how has the economy actually performed during the almost four months of “astonishing failure” to pass an additional massive “stimulus” bill. Actually, remarkably well. According to the Bureau of Labor Statistics, the economy added 2.73 million jobs in May, 4.78 million in June, 1.73 million in July, and 1.37 million in August. The unemployment rate, which had shot up suddenly to 14.7% in April, fell to 13.3% in May, 11.1% in June, 10.2% in July, and 8.4% in August.

Meanwhile, at least from what I can observe, nearly all of the remaining unusual unemployment continues in sectors forcibly closed by state and local governments. In my city of New York, restaurants remain forcibly closed for indoor dining. Gyms are just beginning to reopen, with restricted capacity. Essentially all large indoor gatherings continue to be banned, which means that nearly all cultural events, the theater, the opera, concerts, public speakers, clubs, museums, and so on and on, remain closed. The day the state and city governments allow these events and venues to resume, hundreds of thousands of jobs will suddenly return. No amount of so-called “stimulus” will make the jobs return any faster. Indeed, so-called “stimulus” in the form of paying people not to work will only keep workers in these industries unemployed and eliminate the pressure to get the economy re-opened.

In other words, “stimulus” is no answer at all to the plight of the unemployed. The simple answer to the plight of the unemployed is to end the forcible shutdowns, and let the workers go back to work. And as an added benefit, we’ll have $3 trillion less of national debt.

On Friday (September 4) the White House and Congress apparently reached a deal to fund the government beyond the election without any new or additional money for coronavirus-related “stimulus.” As a result, there can be no threat of a government shut-down as leverage to pass such a “stimulus.” We now have a fair shot to dodge this bullet entirely. Republican Senators: Please hold firm.

UPDATE, September 7: It occurred to me to check on the unemployment rates by state, which I haven’t seen publicized anywhere. The BLS does publish unemployment rates for each state; however, the figures come out with longer lag than the national rate, with the most recent figures published on August 21 and covering the month of July. The results are extremely revealing.

First, here are key results. The ten states with lowest unemployment rates are: Utah (4.5%), Nebraska (4.8%), Idaho (5.0%), Kentucky (5.7%), South Dakota (6.3%), Montana (6.4%), Iowa (6.6%), North Dakota (6.6%), Missouri (6.9%), and Wisconsin (7.0%). The ten states with the highest unemployment rates are: Massachusetts (16.1%), New York (15.9%), Nevada (14.0%), New Jersey (13.8%), Pennsylvania (13.7%), California (13.3%), Hawaii (13.1%), New Mexico (12.7%), Alaska (11.6%), and Illinois (11.3%).

Some things are extremely obvious. The ten states with the lowest rates are all states that voted for Trump in 2016, and all but Wisconsin would be in the solidly “red” category. Three of the ten do have Democratic governors (Kentucky, Montana, and Wisconsin). I don’t know the details of all the “lockdowns” in these states, but in the case of Wisconsin, the state Supreme Court (majority appointed by prior Republican governor) struck down the strict lockdown order of the Democratic governor on the ground that it exceeded his valid emergency powers. Meanwhile, the ten states with the highest unemployment rates include all the usual deepest “blue” suspects (Massachusetts, New York, New Jersey, California, Illinois); and eight of the ten voted for Clinton in 2016. Only two of these ten (Massachusetts and Alaska) have Republican governors, and in the case of Massachusetts the governor (Baker) is a RINO who has gone along with the strict lockdown orthodoxy. Meanwhile, of course, the strict lockdowns have not saved the deep blue states from having high coronavirus death rates; and indeed the very highest death rates per million population are in New Jersey (1812/mil), New York (1700/mil), and Massachusetts (1324/mil).