Congress, through its political games and partisan idiocy, has missed the window to keep America working and save our economy, and has instead sunk us. Passing the HEROES Act will practically guarantee a depression-level economic collapse, just in time for the November election. Color me cynical, but I think this is really all about November for them. Any representatives or senators who vote for HEROES would not get my vote. And they shouldn't get yours either.
In late March, when all the schools were shutting down and states were hitting the emergency brakes on our economy, Majority Leader Mitch McConnell was pushing for a stimulus, which did pass–called the CARES Act. Coupled with the earlier FFCRA, which granted employees two weeks of paid sick leave, or up to 12 weeks of paid FMLA to take care of kids, this was a fair start, but it was poorly conceived if the goal was to keep people employed.
I pushed for something like the Payroll Protection Program, a quick credit window, or even a grant, for businesses to get up to 200% of the last 941 reported payroll amount–that’s 2 quarters of payroll, immediately from the SBA without a credit check. Congress punted to the banks, added all kinds of strings to the program, and then threw it in the water like chum to sharks.
The result was $350 billion down the drain in a week, with larger companies, with well-connected banking partners, getting the first in line treatment, and smaller, cash strapped companies, waiting and getting nothing. Then Congress poured another $350 billion down the same hole, but added even more restrictions.
For example, you have to spend all the money in just eight weeks, but you can’t pay bills that occurred before closing the loan (the “origination date”), or save the money for when you can open your business in 10 weeks. You have to spend 75% of the money on payroll, but if your workers are furloughed or laid off, you would have to hire them back and pay them to literally do nothing, then have no money left when you need them to work.
All companies had to certify that they could not access liquidity another way in order to qualify for the PPP loans. Companies borrowing over $2 million are subject to an investigation to prove they don’t have other sources of liquidity. However, this was only announced on May 13, one day before the deadline for companies who took the money to pay it back with no penalty or interest. Before that, nobody knew if there’d be a safe harbor for smaller companies taking smaller loans. Many companies decided to pass, fearing jail time or fines if the government decided they had other ways of raising the cash.
Congress also passed, as part of CARES, an additional $600 per week for unemployment benefits. It became more beneficial for employees to leave their work–and for companies to lay them off–than to try to pay them. And that’s exactly what happened. Congress incentivized unemployment, and we got unemployment.
Other countries decided to directly pay employees while they kept their jobs, even if they weren’t working. This is similar to the FFCRA model, where the government pays the sick leave, except extended to well employees who aren’t working. From the Brookings Institute:
The United States stands out with 14.8% of its workforce having filed for unemployment benefits (Figure 1), which is the highest among the 20 countries surveyed. On the other end, Germany actually saw a decline in the share of its workers filing for unemployment insurance in March, 2020, even as an estimated 20% of its workers availed themselves of short-term benefits channeled from the government to employers (Figure 2).
Congress, through its witches’ brew of confusing programs and counterproductive benefits, created a monster that put millions out of work, because companies either had no choice, or faced enough uncertainty of how to pay employees that it was economically more generous to lay them off.
Now, Democrats want the Senate to pass their HEROES Act and go back to what the other countries have done. Except we can’t go back. All we can do is make the jobless more comfortable in their joblessness.
Perhaps the most egregious example is Democrats’ proposal to expand $600-per-week unemployment “bonuses” through the end of January 2021. There’s nothing wrong with providing people who have lost their jobs due to government’s handling of the coronavirus pandemic with some relief. But offering $600 bonuses through January 2021 would discourage workers from finding new jobs throughout the beginning stages of our economic recovery by paying them as much or, in many cases, more than what they earned in wages prior to the pandemic.
Also, Democrats want to forgive up to $10,000 of student loan debt, eliminate the state and local deduction cap (SALT) through 2021, reducing federal tax revenue while giving blue states a free hand to continue debilitating income taxes for those who are working.
Congress, through its political games and partisan idiocy, has missed the window to keep America working and save our economy, and has instead sunk us. Passing the HEROES Act will practically guarantee a depression-level economic collapse, just in time for the November election. Color me cynical, but I think this is really all about November for them.
Any representatives or senators who vote for HEROES would not get my vote. And they shouldn’t get yours either.