.WASHINGTON: The China Flu, Coronavirus, has sunk the US economy into a deep recession. Government policy going forward must minimize both the depth and the length of the recession.
And this means controlling the spending of out-of-control Democrats who seek to pack any stimulus recovery or help for Americans with plenty of constituent pork. In the last bill, it was providing banking access to marijuana dealers (Pelosi Wants Marijuana Banking Access Included In Next Coronavirus Relief Bill, Congressman Says).
This time around, the speaker is using the quarantines, which Democrats want to push further and further down the road, to push for mail-in voting.
In spite of Congress already spending nearly $3 Trillion to stimulate the economy, Democrats want to spend another $3 Trillion leading to a disastrous longer-term, negative impact.
First, since Congress has already agreed to spend nearly $3 trillion, this new bill may not be needed. The prior spending bills should be sufficient to jump-start the economy and lead from recession to recovery.
If the purpose of the spending is to improve the economy, Congress has done enough already. Spending trillions on marijuana growers, relaxing voter requirements, bailing out the Post Office, and Democrat states and funding the arts does not help the average American.
The most nefarious action of the Democrat’s latest proposal is not just to give more money to households but to add more regulations, leading to more government control.
On Fox Business, Stuart Varney dissects Speaker Pelosi’s latest stimulus package proposal, outlining the real dangers of the Democrat’s latest proposals. Including keeping people at home longer, with real dangers of isolation showing up in domestic abuse and suicide, and providing the US Post Office with a 25 billion bailout.
This is simply not the time to consider more social programs.
Congress already approved stimulus package
Congress already approved, and mostly already paid, money to nearly every American taxpayer. Each adult receives $1,200 and each family of four receives $3,400 from the government whether or not the household has been adversely affected by the current shutdown.
The purpose of this to ensure that households can meet their expenses and to ensure that households have money to spend once the economy fully re-opens.
In addition, all unemployed workers receive an extra $600 per week on top of the unemployment compensation paid to them by their state. While Democrats tout this as good for the unemployed workers, it actually will result in workers staying unemployed for longer time periods.
That’s because when the extra $600 per week is added to their state benefit, many workers are now receiving more money being unemployed than they received when they were fully employed.
When they are called back to work, they will find any reason possible to convince their employer that they need to continue to be unemployed at least until the benefits run out. Employees opting to continue unemployment benefits run the risk of not having a job, as employers will need to fill those positions,
Funding Small business
Prior stimulus packages provided loans for millions of small businesses to pay wages of workers, plus some additional expenses such as utilities and mortgages, for up to two months.
If the business does not lay off any workers, the loan turns into a grant and does not have to be repaid.
In total, already approved spending will give households additional income to spend once the economy re-opens. The bills also give small businesses the ability to stay afloat now keeping them prepared to re-open.
Prior to the virus shutdown, the economy would have produced $21 trillion worth of output in 2020. The already issued $3 trillion stimuli should be more than enough to end the recession and begin recovery.
Any more is probably not needed and will add to the deficit.
Prior to the virus, the annual deficit was budgeted to be $1.1 trillion. Since Congress already agreed to spend an additional $3 trillion the annual deficit will now be more than $4 trillion. Once spent, the public debt will increase to $27 trillion.
The Democrats’ new proposal will increase the annual deficit to $7 trillion and the public debt to $30 trillion.
Is public debt too large?
Economists worry whenever the public debt exceeds than annual GDP. The annual GDP is about $21 trillion. With the Democrats proposal, the public debt will be almost 50% greater than the annual GDP.
Even though interest rates have been low for more than a decade, annual interest expense on the public debt is about $400 billion this year. As interest rates rise and the public debt increases, annual interest expense will also increase significantly
House Minority Leader McCarthy says the bill is “a liberal wish list that has no chance of becoming law.”
Senate Majority Leader Mitch McConnell (R-Ky.), saying, “This is not a time for aspirational legislation.”
Aside from the interest expense, there is a fear that business will be crowded out of financial markets. This meaning if the federal government is borrowing trillions, there may not be sufficient funds for corporations to sell their bonds.
This will slow economic growth and could cause more inflation.
The high debt will eventually put upward pressure on interest rates.
The cost of debt burden on future Americans
The real long term problem is the burden on future generations. There is no mechanism in place to ever pay an inherited debt back. When a deficit is incurred, to finance that deficit, the government sells bonds that mature in 10 or 20 years.
At the core of the Democrats’ new aid bill, is $1 trillion for state and local governments. A total of $500 billion would go to state governments, according to the bill. Both President Trump and Steve Munuchin vowing to not bail out the primarily Democrat-led states. States like Illinois and New York, whose deficits pre-date the Coronavirus and are a result of incompetent leadership.
Over the last few decades, China – a real threat to US economic security, has steadily accumulated U.S. Treasury securities. As of December 2019, Asia owns $1.07 trillion, or about 5%, of the $23 trillion U.S. national debt.
When the bond comes due, the government simply sells new bonds to pay off the mature bonds, so the debt continues to grow.
The answer to stimulating the economy is to safely re-open.
Then the effects of the already passed spending bills should be enough to begin the recovery. Continuing to spend trillions of dollars that the government simply does not have, will do far more harm than good.
Congress and the President must say no to the Democrat’s latest spending proposal.