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I said yesterday that I would circle back around to the stimulus bill….
...accordingly here are just a few thoughts.
Its scale is wrong at several levels and it's this point I want to highlight given the number $2 trillion by itself means absolutely nothing. Relative numbers are what give us context in any analysis.
One, in doing something to turn around the economy it will come up short. If you wanted to sweeten the ocean could it be done by tossing a twinkie into the Atlantic? The $2 trillion amounts to about 1.6 percent of world GDP (in purchasing power). Would a 1.6 percent pay raise change what you were doing if you were worried about losing your job?
There is a larger context of financial neglect that will now come into play in mitigating the effects of this stimulus effort. Global asset prices were sky high in historic terms prior to the virus. McKinsey wrote a fascinating report back in 2015 entitled Debt and (not much) Deleveraging, and in it they chronicled the $60 trillion of debt that had been added in the wake of the 2008 financial crisis. The debt induced prosperity felt great and looked real, but we are now beginning the process of movement toward financial realism, and that moment will be far greater than the expansive effects of this $2 trillion and what the FED will add to it.
Two, it’s scale is off relative to the other priorities of government. Regardless of one’s political persuasion, are there more effective ways of spending $2 trillion? This is 25 times what we spend on all federal educational programs. It's more than twice what we spend on defense. It's about twice what we spend each year on Medicare and Medicaid combined.
Three, its scale is off on being a grab bag of random unrelated priorities. I have seen my share of last minute bills over the years, and they are generally filled with “extraneous” and certainly not read in detail by members of Congress.
Do we really need $25 million in this bill for the Kennedy Center in Washington? Again to give a sense of scale, the center has gotten $68 million in federal grants over the last ten years...a little shy of $7 million a year. But now a pandemic windfall of $25 million this year?
How about $150 million for the National Endowment of the Arts and the Humanities? Talk about a windfall, their 2019 budget was $253 million! While at it, why not include a stocking stuffer of $75 million for the Corporation For Public Broadcasting? This bill did...and so the list goes…
Finally, and most damaging, this bill blows the lid off the door on any semblance of financial restraint. If folks listen to the financial planner Dave Ramsey, what he talks about is the need for differing financial buckets. Your savings bucket, college education bucket, emergency bucket and more set the stage for financial boundaries and is the mark of common sense and prudent financial management. The approach taken in this stimulus package is the opposite. It's “unlimited more” at a time when deficits were already forecast to exceed $1 trillion a year over the next four years. We are headed for dangerous and uncharted waters here. This will end disastrously.
More than anyone I fault the President here. Financial restraint will require executive leadership. Congress is incapable of policing itself here. I don't know that I can even blame certain democrats, they have been transparent in not believing in financial boundaries or realism, but we used to have a coalition on the right that believed in and made noise on pushing back against the government's historic slide toward “more”. Under Trump that coalition has gotten quiet. It's a mistake and I’d ask each one of you who believe in financial sanity to find a way to speak up. If not, it's worth remembering the Bible’s adage, “That he who sows the wind, will inherit the whirlwind.” A financial whirlwind is coming and its seeds are being planted today.
Sincerely,
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