House Speaker Nancy Pelosi’s coronavirus bill is not enough. It is not nearly enough. And if there is any hope of keeping the U.S. economy from free fall, its deficiencies must be addressed this week with a combination of immediate and direct aid to the businesses that feed our families, host our celebrations, employ our neighbors, sponsor our Little Leagues, and make our towns our homes.
The House bill starts off right. Free-testing, paid sick leave, and shoring up Medicare, food stamps, and unemployment insurance. But that’s it. The problem with this wish list is it fails to shore up small and mid-sized businesses, which means it barely begins to address the upward-cascading nature of the destruction.
The coronavirus economic crisis is not the 2008 financial crisis, and a stimulus is not going to save the town centers we love and recognize. More than a decade ago, stupid loans, foolish risks, and over-leveraged companies caused a credit crunch and the federal government chose to infuse banks with capital to keep people solvent and the economy from turning off.
Today, in contrast, we are intentionally turning the economy off to save lives and protect our future, but if we want any shot to turn that economy back on in three to six months, we’re going to need to make sure the small and mid-sized businesses that form our middle class and civil society’s spine are still there. As things stand, they won’t be.
A combination of sudden loss of business and city and state decrees across the country have closed restaurants, bars, clubs, event spaces, catering companies, entertainment venues, and other small businesses. More will follow as we work to curb the spread, with each company forced to send their employees to the public unemployment rolls. The capital crisis, though, is rolling up hill as well: These fully- and half-shuttered companies have landlords, distributors, and a host of others that rely on their business.
The billions President Donald Trump directed the Small Business Administration (SBA) to give banks to distribute in loans won’t cut it. For one, small businesses with no revenue stream and mounting bills can’t afford to go further into debt — they need interest-free loans.
There’s a problem with that too, though: The SBA exists to back up the local banks, and banks want nothing to do with handing out money to struggling companies. What incentive do banks have to give no-profit loans to businesses that are asset-poor, or whose business models don’t demonstrate the kind of profit projections needed to satisfy the bank? As a number of your family’s favorite restaurants, your friends’ favorite taverns, and others have begun to discover over the past week, the banks prefer to send them mining deep into a mountain of paperwork over giving them the money they need right now.
To tackle this, Congress must authorize the SBA to take on a Federal Emergency Management Agency-like role, cutting checks and providing direct infusions to small and mid-sized businesses. The process must be streamlined, with discretion given to the administrator (or a federal corona czar) to oversee and move the machinery along.
Additionally, simple loans aren’t going to be enough if we want the economy to remotely resemble January 2020 when we try to switch it back on. Many of the businesses we love and patronize every week aren’t bank-funded ventures, they’re the physical manifestation of their owners’ personal savings and life’s work. Even a company that is able to defer its rent to a future date and use a loan to hold core employees and business needs is faced with a stark choice: “Do I want to work for the real estate company or the bank for two, three, four years digging out of this, or do I want to close shop, join my employees on the dole and maybe — maybe — try again another day?” The effort is going to look similar to a mass-scale version of our program to pay farmers not to farm land so that land remains productive. That, for our hometown economy.
But how much is enough? The process is going to be victimized by fraud and abuse, although one method for more-safely streamlining the process is to ask business owners to present tax returns from previous years — documents already verified by the federal government. A percentage of past revenues can then be given directly to the business in a combination of grants and loans, with the specifics decided by negotiations between the House, Senate, and White House. New ventures, unfortunately, likely must be left to falter.
It makes no sense to send a level of relief unprecedented in modern America and then to demand it back in April’s taxes, so Democrats are going to have to come around to the understanding that the nature of this challenge and the necessary response demand a suspension of a number of federal taxes.
Politicians and the Federal Reserve know that the solutions necessary will lead us screaming toward inflation. Dangers abound, and it will be a hard bill to swallow for both parties. While world governments and laboratories work day and night to develop vaccines and treatments to lessen the coronavirus’s impact, however, Washington must move.
Right now, as the current and completely deficient House bill moves through the Senate, the powerful airline and cruise industries are using their considerable size and influence to carve aid out of the U.S. taxpayer. Washington is going to give it to them, too, because we do not want to emerge in six months without a U.S. travel industry. How is the United States of America content saving airplanes while our middle class goes under? It’s the same middle class, by the way, that will be needed to buy those airplane and cruise ship tickets on the other end.
We’re all in this together, and we can neither expect to get all our money back nor be satisfied with none of our money back. Once again it will be a difficult compromise between Republicans loathe to hand out money and Democrats loathe to ask for it back.
Congress needs to move now, though, because while the woes of small businesses across the country are hitting their owners today, they will be hitting their employees tomorrow and their landlords the next day as the impact compounds. The liquidity crisis lands on all of our doorsteps, so the question for the House, Senate and president is how many middle-class entrepreneurs will it leave in its wake?
This isn’t 2008, and the program outlined above is not a stimulus — it’s a national mobilization. And it is necessary to save the country we know and love.