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Washington wants to go big on stimulus, we’d rather they get it right

It should be clear now that our leaders in Washington have gotten the memo that the coronavirus poses a crisis. That much should be clear, because the talk in Washington is about passing the largest stimulus package in history.

We understand the impulse, and we’re on board with a federal response to this unprecedented crisis. After all, it’s beyond obvious that a large number of Americans are likely now (or in the near future) to apply for unemployment benefits because they’ve been suddenly tossed out of work. What’s more, tens of millions of other workers have grown understandably anxious about their economic future. And it is also clear that entire sectors of our economy are getting hammered as the economic activity they live off vanishes.

But it’s one thing to help out-of-work waiters and waitresses, idled laborers, and retail workers who suddenly find themselves confined to apartments they can no longer pay the rent on. It’s something else entirely to push what’s now ballooned to a a bill that officials say will likely be in the ballpark of $2 trillion. Before such a thing is signed into law, we should all be asking tough questions about effectiveness and the national debt in the long run.

And there are also a couple of cautionary tales to consider. First, the last time we faced economic calamity, it was estimated that the Internal Revenue Service needed something like two months to prepare and send direct payments to Americans. Are the feds more nimble now? It’s an important question to ask, because otherwise money being authorized now won’t actually reach people in time to make a difference.

The second cautionary tale is that in the 2008-2009 financial crisis, some of the money plopped into the unemployment system went unspent. It seems states didn’t have the capacity to handle a large expansion.

Our point is that as well intentioned as stimulus packages are, efficiency and efficacy aren’t generally their hallmarks. Put another way, it’s actually hard to spend $2 trillion quickly, and it’s even harder to spend it well.

It’s not impossible, however, for the feds to make a positive difference. To that end, we recommend doing three things — even if that means going back to the negotiating table after a broader spending deal is struck on Capitol Hill.

First, speed is crucial for part of the stimulus bill. So take the pieces where speed needs to be prioritized, and put them into their own bill. We believe speed is essential for the Federal Reserve to increase its facilities that add liquidity to the marketplace. To that end, Congress wants to capitalize such initiatives, and it should do so in this must-pass-now bill. Americans suddenly tossed out of work also need the ability to cover immediate bills as they make hard decisions about changing their lives.

Our thought is that checks that arrive weeks or months from now will not accomplish what they were intended to do. So Congress should be focused on moving quickly. If that involves sending a check to every American regardless of income, that’s the cost of resolving the immediate problem. Congress could even add a provision that requires Americans who maintained a good income through the crisis to pay back any check they cashed from the Treasury when they file their taxes next year. In any case, it’s also important to remember that, say, $200 billion for direct payments is a lot of money. There is also nothing to stop Congress from coming back in a couple of weeks and adding to that amount. In other words, spend what’s necessary now, but don’t overspend.

Second, we would note that speed isn’t as crucial with other portions of the stimulus spending. So we’d encourage Congress to develop two additional bills. One should be aimed at small businesses that are in a pinch because of the coronavirus. Restaurants are hurting now, keeping them alive will help jobs spring back to life after the crisis passes. But we doubt they can handle massive new debt payments as they get on their feet. Some creativity might help, especially if it’s along the lines of loan forgiveness to small employers that maintain or even create jobs later in the year. Congress should be willing to spend a few days working that type of thing out.

And third, larger companies should be able to stay alive in the immediate term as we decide what should be done. Our view is that any help should be focused on loans, taking equity stakes and enhancing liquidity. We’re not of a mind that every company should be shielded from bankruptcy. And as markets are reoriented, some layoffs and other unpopular moves may be necessary. The aim shouldn’t be to avoid every bad outcome. Instead, the focus needs to be on keeping employers alive during the crisis and then pushing them to become self-sustaining as quickly as possible afterward.

There aren’t many fliers who wouldn’t favor changes to the flying experience — from bag fees to seat sizes, there’s a lot of changes many of us want. None of those changes should be pushed through a stimulus spending bill. If new rules are needed, enact them when we’re not in crisis (when rational policy making is possible). It would be a mistake to impose new rules that would inhibit a fast recovery for airlines or other companies. We should take the time now to ensure we get a faster economic recovery later.

In short, we encourage Congress to break the stimulus bill into component pieces, refrain from the talking point of a big total number, prioritize spending money wisely, and focus on making sure the private economy can come back to life, not getting wish-list regulations signed into law. And we hope everyone in Washington also remembers that the best stimulus is ending this crisis quickly. That means rapidly boosting testing capacity, increasing medical supplies and equipment in short supply, and pushing for a vaccine or other treatment. If we make the right choices now, once we solve the health crisis, our economy will also be on the road to recovery.

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