Politicians in Washington, D.C. are currently arguing about how to best salvage the US economy. The Senate unanimously passed an economic stimulus package aimed at boosting individuals and companies most affected by the coronavirus closures, and the House is expected (as of this writing) to likewise pass it. Prior to this writing, President Trump said he would sign it into law.
The package includes direct payments to individuals. Each single taxpayer making less than $75,000 annually is eligible to receive $1,200. Married couples making less than $150,000 annually are eligible for $2,400, and $500 will be issued for each child.
Workers will undoubtedly be glad to receive the funds. Many people were unexpectedly let go or lost their wages temporarily in the widespread business closures that followed the spread of Covid-19. The stock market suffered a massive downtown that brought fears of another Great Depression. A global recession is certain to occur, but nobody knows exactly how bad it will be, as we haven’t yet experienced the full effects of this global pandemic.
A common method to staunch the cash flow when a national economy is hemorrhaging dollars is for the federal government to directly inject money. Right now, our national debt is the highest in the world at $22 trillion. The economic stimulus plan will add another $2 trillion. This is in addition to the $1 trillion that the federal government already planned to borrow for routine spending in 2020.
The government acquires debt either by borrowing against its own programs, such as Social Security, or selling bonds to foreign investors. Congress hopes the economy will grow faster than the debt, and that bond owners don’t all cash in at once. With so much outstanding debt and no clear plan for how to repay it, can we keep digging ourselves into an even deeper financial hole and still retain our position as a world power?
Politicians are gravely jeopardizing America as we know it by shutting down the economy and continuing to borrow heavily, both as modus operandi and in times of crisis. Right now, people are suffering financially. All across America, businesses were shut down overnight. Paychecks were immediately canceled with no definite return date. Countless jobs will be forever lost due to the massive closures associated with Covid-19.
We all need money to pay our mortgages, buy groceries, fill up our gas tanks, keep the lights on, and more. The stimulus checks will go to grateful citizens and help save important industries that suffered crippling blows. Airlines, restaurants, and hotels will benefit from bailouts. Nobody who lost money in the stock market, including those who held retirement accounts, will receive financial assistance from the feds. Direct payment recipients will gratefully spend their checks and revive our economy at least a little bit, but this isn’t free money.
It’s more money that we collectively owe to someone else. We now owe the money to future generations, who will have to figure out how to continue Social Security payments with yet another debt leveraged against that account. We owe foreign investors even more than before. Right now, China and Japan holds most of America’s outstanding foreign debt.
$1,200, or even $3,400 for a family of four, will go fast in the absence of a regular paycheck. It’s a small sum that will add immensely to the national debt. When this pandemic is over, we will be a nation of survivors even more burdened by both personal and national debt.