Imperfect, Yet Essential

By: Dr. M. Ray Perryman
Published in syndication March 17, 2021

The latest stimulus comes with a price tag of $1.9 trillion, adding to the $4 trillion authorized last year. The final bill is a "mixed bag," with numerous provisions crucial to sustaining the recovery but others less essential. Such is inevitably the case when anything of significance grinds its way through the Congressional sausage-maker. Make no mistake, however, a substantial package was indeed necessary.

Many Americans will be receiving $1,400 checks, with the first payments beginning to arrive. An extra $300 weekly in unemployment for a year, an expansion of the child tax credit, and other payments will also bring funds to many households. Money will go to schools, state and local governments, and vaccination programs. Certain pensions are among the beneficiaries. In addition, there are subsidies for buying health insurance under the Affordable Care Act and to certain states that opt to expand coverage. There are provisions to help small enterprises, key sectors, and other elements of the economy.

These outlays and others are generally aimed at partially relieving the financial stresses many families are facing, which in all too many cases have become both extreme and enduring. In normal times, about 70% of the US economy is driven by consumer spending; pumping money into the spending stream will enhance overall growth. Other stressed entities are also supported, decreasing the chances of future meltdowns.

There is merit, however, to the claim that relief could have been more targeted. Even if an individual did not miss any paychecks through the pandemic, for instance, an aid check will still be forthcoming if income requirements are met. Moreover, many cities and states have not seen the notable declines in revenues which was feared. Distribution policy is rarely done with a scalpel, but rather a machete. Other provisions introduce questions of fairness or the incentives which are generated. At some point down the road, the total level of debt will come into play.

As I began saying a year ago, this crisis was precipitated by the pandemic, and the keys to coming back robustly are (1) getting the virus under control and (2) keeping our economic structure and integrity together in the interim. The CARES Act helped initially, as did aggressive actions by the Federal Reserve, but this situation became worse and lasted longer than anticipated. The "skinny" bill passed last year was both too long in coming and insufficient in magnitude to hold things together.

As we continue to progress with vaccinations and therapeutics, the economic rebound will be enhanced. The stimulus package provides a bridge to the time when full operations can resume. It also helps individuals, companies, and public entities through daunting challenges. Imperfect, yet essential. Stay safe!