CYCLOPS: Time for boldness in stimulating the economy
Discussions of the proposed economic stimulus package often center on the total cost and its impact on the national debt. Too little attention is paid to the effect stimulus checks make to individual men and women.
Two weeks ago I drove into a parking lot for a restaurant I frequently visit. I was surprised at the large number of vehicles since this restaurant had been a “ghost town” during the spring and summer of last year.
What was the difference? “Stimulus checks,” said my server.
And how did it affect her? “My check went toward the rent on my apartment,” she said. “But with people spending their checks on restaurant meals, I’m getting almost double the hours at work and more than double the tips. And for the first time in six months, I’ve gone out and spent some money at the mall.”
Which, of course, means the mall store can also increase employee hours, etc. etc. Franklin D. Roosevelt called it priming the pump and his efforts at stimulating the economy effectively freed the country from the grip of the Great Depression. (Yes, World War II spending helped as well, but WPA projects and other infrastructure spending were a major stimulant.)
Maybe President Biden’s $1.9 trillion proposal is too much. As mentioned in last week’s column, a sizable number of Utahns and Americans are skating by just fine. But I believe the proposal by a group of moderate Republicans is akin to putting a piece of gauze on a severed artery. It fails to meet the crisis.
Under the Republican offer, $1,000 direct payments would go to individuals making $40,000 a year with partial payments to those earning $50,000. This may be fine for residents in rural Utah and South Dakota, but seems flimsy for those living in more urban areas. What is $1,000 to a person in the Bay Area where the median home price is $980,000 and where an apartment rent averages more than $2,500 per month? What is a $50,000 per year salary in San Diego where most homes are priced over $600,000? Can a $40,000 salary in Denver allow a man or woman to buy an average priced home of $460,000?
President Biden’s plan, of course, is not geared for people buying houses. But his plan – $1,400 per person with even a fraction of that amount going to those earning $300,000 – is more likely to help the economy, though I would recommend phasing out stimulus checks to those in the over $175,000 earning segment.
Deficits are not new and the GOP didn’t seem too worried about a deficit when it cut taxes during the Trump presidency. Deficits haven’t harmed the economy. Since 1961, deficits have grown almost every year under both Republican and Democrat presidents. Yet look at how the stock market has reacted; a $10,000 investment in the S&P 500 stock index in 1961 today is worth over $3 million (with the top performance coming in the presidencies of Bill Clinton, Barack Obama, Gerald Ford, and “Daddy” Bush). I don’t necessarily agree with the Democrat boast of “Go big or go home!” There must be a reason for going big. But I do agree with the former U.S. Secretary of Labor Robert Reich who wrote, “Millions of people are hurting…The best way to reduce the debt as a share of the economy is to get the economy growing again…If ever was the time for boldness, it is now.”