To mitigate current economic woes the government is handing out trillions of borrowed dollars. The general idea is good, but there are serious problems with the details.
The legislation authorizing the giveaways has been too complicated, enabling large organizations to game the system. A wealthy sports team picked up several million dollars (returned by the embarrassed organization when word got out).
Giveaways can either hand out cash or reduce people's taxes.
One proposal is to reduce payroll taxes on workers. But this wouldn't benefit people who lost their jobs. Another proposal would decrease the capital gains tax, in order to "increase investment."
However lack of investment isn't a problem in an economy where existing facilities aren't being used to full capacity. And investments might be in machinery that replaces workers.
Even worse are proposals to allow businesses immediate tax deductions for the full cost of equipment and buildings. One suspects the influence of a well-known real estate speculator here.
We currently need, not investment, but increased purchasing power, and that is best promoted with cash or equivalent benefits. .
When government hands out cash in a small number of big packages, large organizations lobby for preferential treatment in the legislation itself.
Then their lobbyists get them on the train fast enough to secure most of the gravy for themselves.
Ideally, handouts should be distributed equally to everybody in the country rather than to selected organizations. Or, at least they should be targeted at those most damaged by the coronavirus economy — thrown out of work and often thereby losing their health insurance.
The government should expand programs that already exist — like Medicaid, school lunches, and food stamps — to get the money where it is needed as quickly as possible.
Food stamps allow hungry people to shop in established grocery stores, which can handle large numbers of shoppers, rather than lining up to get into overwhelmed food banks.
School lunches — especially helpful for children in poor families — have been continued by some shut down schools but could be expanded. Expanded Medicaid can protect millions of workers who lost their insurance along with their jobs.
In the longer haul, though, an ideal policy would probably distribute equal numbers of dollars to every resident of the United States, rich or poor, employed or unemployed, citizen or non-citizen, as a "residents' dividend."
Unlike recent cash distributions, a residents' dividend would not require officials to decide who gets the money. Administration would therefore be far simpler than has been the case with recent stimulation programs.
Whether former presidential candidate Andrew Yang's proposed universal basic income is ever adopted or not, we should establish a system that could easily distribute money to the entire population.
This could be a government account for every resident of the country into which basic income payments could be deposited, if that system is created, and where distributions required by an economic emergency could be deposited.
People could draw on these accounts with a debit card.
Tax refunds and Social Security payments could also be deposited into the accounts of people lacking checking accounts, avoiding the need to mail them out as checks.
Handing out large benefits to a few organizations, we hope that this money will then "trickle down" to needy individuals.
But why just hope?
A residents' dividend would get the money directly to individuals. It would pump up general purchasing power and the extra money would then "bubble up" into the various organizations whose goods and services people would pay for with that money, allowing them to rehire people and pay their own bills.
The well off, included for administrative simplicity, could be encouraged to donate their share to various good works.
Let's continue to stimulate the economy. But let's do it efficiently.
Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. He received his Ph.D. from Johns Hopkins University in 1966, and has been a National Merit Scholar, an NDEA Fellow, a Woodrow Wilson Fellow, and a Fellow in Law and Political Science at the Harvard Law School. His college textbook, "Thinking About Politics: American Government in Associational Perspective," was published in 1981 and his most recent book is "Beyond Capitalism: A Classless Society With (Mostly) Free Markets." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. Read Prof. Paul F. deLespinasse's Reports — More Here.
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