There is no reasonable person who doesn’t concur that Covid related financial relief to the American public was both necessary and justified. What many people from all political persuasions are now beginning to recognize is that unfocused, non-targeted over-spending for this purpose has ascended to astronomical levels.
Bad spending decisions for political purposes still constitute bad money being spent for ostensibly good reasons. Due to our country’s deep debt crisis, reacting to the Covid crisis with unwise deficit-spending means throwing good money after bad is no better than hurling bad money after good.
During the last full year of the Trump Administration, the CARES ACT provided much needed funding to the unemployed, those in need of rent assistance, and money for enhanced Covid testing, etc. That Act allotted $2.2 trillion dollars to provide fast and direct economic aid to the people. The bill was developed over approximately 6-months. Markedly, this bill was passed with a large bi-partisan support in Congress. This bill also included the Paycheck Protection Program (PPP) to keep people employed. As of April 2021, the SBA has dispersed $746 billion of the $813.5 billion appropriated by Congress for PPP. Over sixty billion dollars for PPP remains unspent today.
The CARES ACT was imperfect in many ways because of the rapidity with which it was passed and executed. People already on unemployment compensation were paid more than they were previously entitled. This posed a major disincentive for people to seek work. The PPP disbursements were also flawed in many respects as these monies were given to companies with no financial difficulties. Huge expenditures were dispersed to large corporations not planning to lay people off. So while the PPP helped many companies keep people employed, hundreds of billions of dollars were provided as forgivable loans (grants in reality) where such pecuniary support was unwarranted. As an over-arching back-drop, nearly $800 billion of the $2.2 trillion in the CARES ACT has yet to be spent. This means there is a lot of Covid relief money already in the queue . Even to those who are numerate, trillions of dollars are hard numbers to comprehend. Just bear in mind a trillion has 12 zeros after it. A million has six. To place this all in context, the U.S. federal debt at the end of 2020 had reached 98 percent of the country’s Gross Domestic Product. This is the highest level since the end of WWII.
The U.S. Debt as of February 2020 was estimated to be $23.3 trillion dollars. This number did not include the $2.2 trillion dollars from the CARES ACT. The CARES ACT was an exemplar of why colossal spending bills by the U.S. Federal Government should not be implemented too quickly. Too much money is unwisely spent and too much “pork” is heaped on such bills when there is a crisis used to capture special interests.
One hopes reasonable people will grasp that there must be limits to D.C.’s largesse vis-à-vis deficit spending. The debt crisis in America is — to adopt an overused phrase today — an existential threat to the people of the United States. Colossally impactful spending bills shouldn’t be written and passed in haste. Ample measures of scrutiny should be applied to minimize the detrimental effects on inflation and irretrievable debt burden. In short, this kind of spending must be more carefully focused.
The CARES ACT was grossly flawed, but it, at least, garnered overwhelming bipartisan support. Most of the money actually was focused on Covid relief.
To quote Dave Ramsey, an experienced and successful financial advisor with a radio gig, “You must gain control over your money or the lack of it will forever control you.” We as a nation must now embrace the downside of that wise guidance. Our debt and deficit are equally out of control. And the one weapon we had from a monetary policy standpoint to right future recessions and downturns – lowering of interest rates – has been exhausted.
Losing control of our money just got much worse in the form of the American Rescue Plan, aka the Covid 19 Stimulus Package developed by the Biden Administration. This bill was written and submitted to Congress in less than 2.5 months following Biden’s inauguration. It was passed hastily by the 117th Congress before most House Members ever read it. It was passed on a completely Partisan basis in both Houses of Congress. This bill with a total price tag of $1.9 trillion again provided extended unemployment benefits, increases in unemployment benefits irrespective of whether or not the unemployment was related to Covid, a child tax credit increase to most Americans, rent forgiveness, and some support to businesses to retain employees on the payroll. But, this bill further exemplified pork fat. It includes a financial stimulus of $1,400.00 to all married household members with a gross income of $150,000.00 when filing for taxes jointly. It includes $1,400.00 to a single person with an adjusted gross income of $75,000.00 or less. It gives $1,400.00 to all in the household if the head of household makes $112,500.00 gross income. This stimulus is being given to people with no regard to their need for financial assistance. This stimulus money accounts for 22% of the $1.9 trillion or $422 billion. For unemployed folks, a $300.00 per week emergency benefit is added to their normal unemployment compensation until September of 2021. This is again regardless of their need. This benefit merely provides a disincentive for the unemployed to seek gainful employment. This blatantly reveals the complete lack of focus and targeting needed to help those who really need help. Rather, this “throw it all at the wall to see what sticks” is reminiscent of the “shovels ready – not really ready – stimulus” of the Obama-Biden Administration.
The American Rescue Plan sold as a response to the Covid 19 Pandemic mostly spends money this country doesn’t have on non-Covid related programs. Here are a few salient examples:
- $519 billion to State and Local Governments – most of which were already in the red prior to Covid due to poor financial management
- $510 million to FEMA for Homeless Shelters
- $10 billion to Infrastructure Projects including a rail system for the Bay Area in California
- $130 billion for School Support – when we know schools were already safe based on CDC Guidelines
- $200 million to AMTRAK – a private corporation, subsidized by the Federal Government that lost money every year prior to Covid
- $480 million for Native American language preservation
The list goes on and on. These are not Covid related expenditures. This boondoggle of a bill was written and passed in record time. It was assiduously sold to the U.S. taxpayers through the media as Big, Bold, and Fast because of the need to rescue us from the Covid Crisis. This bill’s expenditure pushes the U.S.’s National Debt beyond our GDP. Talk about your lack of money forever controlling you. So, this is where we are today. The American people have been duped badly. Many national polls indicated over 60% of the Americans polled supported the Covid Rescue Bill of Joe Biden. They clearly didn’t read the 580 plus pages of the bill. I did and what I found was a government that has led us to a fearful pass. Desultory and hasteful spending bills like this one will hurt the U.S. economy irretrievably in the long run. Your children will pay the price for out-of-control tax hikes, rampant inflation, and an ever burdening national debt. The CARES ACT was excessive, but we could have recovered from it. Now the Biden Administration plans to spend multiple trillions more in a hurry.
A lot less money could have met the Covid related needs of the American people. Untethered deficit spending can only result in our lack of money controlling us in the future.
R. Andrew Nixon
Old Lyme, CT