As final agreements on the new COVID-19 stimulus package were negotiated last week, crucial help for businesses and families was approved alongside projects having less to do with economic recovery.
“The new relief package reminds me of the lyric from the Who, ‘Meet the new boss same as the old boss’ – just like the first package, there are some necessary expenditures mixed in with all sorts of waste and pork,” Wayne Winegarden, Ph.D., senior fellow in business and economics at the Pacific Research Institute, told the Northern California Record by email. “For instance, why is the extension of the subsidies for wind and solar power included in the Covid relief bill? Why do people who have not lost their job or lost any income need ‘stimulus payments’”?
Payments of $600 were scheduled for distribution by the IRS.
“Expenditures like these are generating a large bill that we will be paying for many years in the future while creating no benefit in the here and now,” Winegarden said.
Meanwhile, the Paycheck Protection Program (PPP) has been extended through March.
“The small business loans, while riddled with too much micro-managing, will help businesses bridge the shutdowns and lost revenues,” Winegarden said. “These programs, along with the relief for people that have lost their incomes, should be the sole focus of the bill and has value for the economy.”
Winegarden noted the bill could have been more focused by creating long-term certainty for people requiring support, but with provisions to ensure that the incentives for growth are maintained.
“This means support for people who need the help, with a formula that ties the support to the broader economic conditions,” Winegarden said.
Some key inclusions didn’t make it into this relief bill.
“It seems that the liability protections were removed for purposes of ‘making a deal,’ not because the issues have been adequately addressed,” Winegarden said. “The liability problems are not less pressing now, nor has the issue been resolved by the states. The liability risks remain a threat to future growth that will hopefully be resolved in the near future.”
Roughly 30 states have passed some form of liability protections, Inc. reported. California isn’t among them.
“The partial lockdowns that are being implemented make California’s economy particularly vulnerable to economic distress, meaning that the targeted support is particularly valuable to the shuttered businesses and workers in California,” Winegarden said. “It is important to emphasize, however, that this refers to the support for private businesses and individuals. The support for the state government should not be a focus of the federal support programs. California state government revenues are doing significantly better than predicted, and the state’s fiscal problems are structural and long-term. Until these long-term issues are dealt with, California’s fiscal state will continue to be a drag on the economy.”
Winegarden noted that a push for additional relief is expected in the coming months.
“The justification for another program is based on flawed Keynesian multiplier analyses that treat the economic problem as if the problem was inadequate consumption,” Winegarden said. “The government does not need to rush through another package, including upping the payment to $2,000 for all Americans regardless of whether they have been financially impacted by the shutdowns or not.”