Congress is set to move forward with a massive bailout package due to the economic impact of the effects of the coronavirus. The original proposal was for $800 billion but has grown in steps over the past weekend and last two days to $2 trillion as ever more adjustments and additions were made to the proposal. What does all of this mean? Here are some of my thoughts.
To begin with it is an indication Congress and the Senate have been influenced by Alejandria Ocasio-Cortez and her Modern Money Theory (MMT) economics. What is MMT? In simple terms it is a theory that governments that print their own money don't have to worry about debt burden. They can create as many programs at what ever cost as they want as long as the workforce remains productive. They just go ahead and spend. After all it is not like anything physical is passing hands. It's just a bunch of ones and zeros moving through cyber space. I guess that is why in all of this rush to put together a package there has been no discussion of raising the debt ceiling and what impact this will have on our current national debt of $23 trillion.
It is, also, an opportunity for Congress and the Senate to pad the coffers of all their favorite programs and special interests. As an example, the package includes $25 million for the New York Kennedy Center, $75 million each for the National Endowment for the Arts and the Humanities. What any of these have to do with the health and welfare of those affected by the virus or with the financial impact shutting down businesses has had on the average American is beyond me. Especially since at last tally the Kennedy Center had $400 million in assets. What else is in the bill along these lines we may never know. It's Like Nancy Pelosi said when pushing Obamacare through the House, "Let us pass the bill and then you can read it." What average American is going to read 2000 plus pages of legalese? Once it is passed there is never any turning back. How much of the growth from the original $800 million to $2 trillion can be accounted for by similar special interest expenditures?
As a whole this is a massive takeover by our Federal Government. Democrats have always been in favor of a larger role for Federal Government. Republicans were supposedly in favor of decentralized government, in the hands of the States and local authorities. When did they change their view? Controls that are imposed will become the norm, just like social distancing is becoming the norm. It also creates a precedent for how the government should act when the nation confronts an emergency. The public doesn't complain because they are terrified by what they are being told could happen. We are being led like lambs to the slaughter.
In the end, how much of this money will get into the hands of those who need it? With the exception of the checks or deposits that are supposed to be coming to families, I expect very little. They say they are pleased they were able to get in controls similar to the controls on TARP (Troubled Asset Relief Program). How did that work out?
Several years ago I wrote an article on a previous web site which I am reproducing here:
Understanding Our Fiscal Crisis
It is important we understand the fiscal crisis we are in and what has brought us to this point. For anyone who wants to understand our economy, how it works or doesn't work and the actions leading to the crisis, I recommend the following three books.
If you believe understanding the economy is difficult start with Henry Hazlitt's "Economics in One Lesson."
Once you feel more comfortable with the concepts then proceed to Thomas E. Woods Jr.'s "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse"
Then to understand how government has failed to steward the stimulus and bailout programs they insisted were necessary read Neil Barofsky's "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street."
Once you have read these three books I believe you will have an understanding of what is wrong with the economy and where we are headed if government continues to try to manipulate the outcome.
Yes, these are trying times. They can be fearful times, especially with all of the negative press. But this is not a time to panic. It is a time for clear heads. I urge everyone to use their common sense and examine what is being said in the press and the media. Some politicians have been stating millions of Americans will become infected. Where are they getting this information? They talk about all of the people who are infected but never about the 9 out of 10 who test negative for the virus. Never about the number of infected who have actually recovered. There have been pockets of sever infection, Italy, Iran and New York but there are also areas where the spread of infection seems to be under control and others where there is seemingly little infection at all.
My sense of the whole thing is there are way to many politicians and others whose interests are more in having their 15 minutes before the cameras than in ensuring we have the best information available to guide us through this difficult moment.