$1.9 Trillion: What's Not There
The $1.9 trillion package is now law. While the sum is huge, elements which are not included are key to understanding whether the stimulus will result in sustainable growth or a surge in inflation.
The generous program has a number of provisions to help reduce suffering by unemployed and low-wage workers. Much discussed is the one-time $1,400 checks for individuals earning less than $75,000 per year — $2,800 for couples earning up to $150,000. Another key component is the extension of the $300 per week supplemental unemployment benefit through September 6, with the first $10,200 of the jobless benefits being tax-free.
There is more: $350 billion, equivalent to almost one-fifth of the total package, will go to city and local governments hit by the plunge in tax revenues. Some $30 billion will go to housing assistance — mortgage relief and aid for the homeless, for instance. The common objective of these measures is the alleviation of the covid-related difficulties of individuals and institutions.
Notable by its absence is any initiative to help improve their lot in a sustainable manner. Once the couple that receives its $2,800 check has spent the sum in purchasing essentials — thereby boosting the economy in the short-term — there is nothing to stop them from needing fresh assistance after a few months.
In a SriKonomics post in January, I wrote that while a hungry person needed fish for survival, it would be better to follow that move by teaching the individual to fish to enable him / her to eventually become self-supporting. Next time the person is hungry, he or she would not have to depend on a fresh supply of fish being delivered.
I have written and suggested repeatedly that a covid relief package include components of spending to train workers to improve their skill levels and, thereby, enhance their future earning potential. This way, worker subsidies can be reduced over time rather than make handouts a permanent feature of the fiscal package. Such a program to improve worker skills has a rich history. The Hartz Reforms of Germany implemented during 2003 - 2005 rejuvenated the sick German economy at the start of the century and transformed it into an economic giant.
In conclusion, it is not just the size of the package that is daunting — almost $2 trillion in spending after an estimated $4 trillion during 2020. It is the absence of elements to make workers’ lives better in the long-run that is the crucial failing of last week’s fiscal program.
Dr. Komal Sri-Kumar
President, Sri-Kumar Global Strategies, Inc
Santa Monica, California
March 14, 2021
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