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OP-ED: The problematical COVID-19 relief legislation

Dr. Mark W. Hendrickson

Americans are known to have big hearts. When disaster strikes, Americans unselfishly and heroically extend a helping hand. That certainly has been the case in response to the COVID-19 pandemic. Nobody wants to see those who have lost income through no fault of their own also lose their place of residence or their car or even their ability to afford food.

It was that spirit of generosity that prompted Congress and President Donald Trump to enact as many as five rounds of legislation since last March in the name of “COVID relief.” Unfortunately, though, in this imperfect world of ours, good intentions sometimes lead to unwanted consequences. COVID-19 relief has been a classic example of that truism.

When Congress and the president authorized the spending of more than $2 trillion last spring, only the naive would believe that so much money could be spent efficiently. Indeed, the Small Business Administration was tasked with issuing more loans and grants in 30 days last spring than the SBA had processed in the previous 14 years. It was a humanly impossible task for them to distribute that much money without billions and billions of dollars being wasted by being given to various cheats and ineligible recipients. Other objectionable spending in last spring’s CARES Act included sending a million checks to dead people and thousands more to European citizens.

The gargantuan waste from earlier COVID relief bills did not deter Congress from authorizing another round of spending—approximately $900 billion (so far)—a few days before Christmas. This recent appropriation illustrates the basic problem with our federal government today: It is simply too big. Like the passage of the Affordable Care Act (“Obamacare”) a decade ago, it was a humongous spending bill (5,593 pages) that was slapped together by unknown persons behind the scenes, then sent to the floor of Congress for a vote before the members would have time to even skim the entire bill. Even Rep. Alexandria Ocasio-Cortez sounded a note of economic sanity when she tweeted, “Members of Congress have not read this bill. It’s over 5000 pages, arrived at 2 p.m. today, and we are told to expect a vote in 2 hours.”

Despite the criticisms, Congress still passed the bill without any thorough vetting. Because COVID relief was packaged as part of a $2.3 trillion omnibus spending bill that included many controversial gifts of foreign aid, there was a public backlash as some people thought that COVID was being used as a cover for foreign aid. President Trump (ever the populist) tried to take advantage of this confusion by urging Congress to give $2,000 instead of $600. Naturally, Democratic leaders—never ones to shun government handouts—quickly jumped on board this proposal. What is alarming to this economist about this proposed Santa Claus expenditure is how close it comes to the emerging wacky economic theory known as “Modern Monetary Theory:” the absurd notion that government doesn’t need to tax citizens in order to spend money, but should simply have the Federal Reserve create new money.

Another feature of COVID relief that Americans should be aware of is that Congress is using it as a pretext to bail out bankrupt state governments. I have long wondered how the big-spending, high-tax states were ever going to climb out of their deep fiscal holes. After all, unlike the federal government, state governments don’t have a central bank like the Fed to bail them out. Now they do. The Fed is now purchasing billions of bad debt from these governments, and progressives in Congress are using COVID-19 relief to funnel tens of billions of dollars to their progressive allies in heavily indebted states—a sharp slap in the face to the citizens of states where governments have had the discipline and integrity to live within their means.

I will close by making an unfashionable statement: The federal government should not be in the business of financial bailouts for any person, any business, or any state. The regnant progressive ideology of today holds it as its primary article of faith that the government should take care of the citizenry’s economic needs. The inescapable problem here is that human needs are unlimited. There are always more needs to be met. That is how we evolved into our current situation where the federal government is swindling future generations by having accumulated more than $27 trillion of debt while politicians use our tax dollars to buy votes for themselves by strategic “beneficent” spending. Ultimately though, only people can help people. The federal government should do what it was created to do—keep our people safe from foreign and domestic depredations—and leave charitable bailouts to individuals, private organizations, and (arguably) to local and state governments where the lack of a central bank tends to keep them from spending money they don’t have.

 

Dr. Mark W. Hendrickson is a retired adjunct faculty member, economist, and fellow for economic and social policy with the Institute for Faith and Freedom at Grove City College.

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