How Are We Going To Pay For This?

By Joshua Weigert
April 3, 2020

The world is currently engulfed in an unprecedented pandemic that is threatening the lives of millions of people worldwide. Every western country has seen lockdowns initiated by the local, state and/or federal governments. Sporting leagues and events like the NBA, Summer Olympics, UEFA Euro 2020, and many others have been cancelled or delayed without a timetable to return. Wimbledon, which has not been cancelled wince World War II, was officially cancelled a few days ago.  More seriously, millions of people around the world have faced or will face job loss as a result of COVID-19. According to the US Labor Department, ten million Americans have already lost their jobs as a result of the business shutdowns caused by COVID-19.

The Canadian job market isn’t doing any better, either. According to the Angus Reid Institute, a leading research organization in Canada, 44% of Canadian household say they’ve lost work or experienced layoffs due to the COVID-19 pandemic (1). Another 18% of Canadian households expect layoffs in the near future. According to The Globe and Mail, the Canadian government expects four million Canadian workers to apply for government assistance for COVID-19 (2).

In both the US and Canada, these workers need assistance. These people need money to pay for food, amenities, loans, mortgage, rent, car payments, and a host of other things.

As a result of measures put in place by governments, many small businesses were forced to close. These business owners lost their income. Some may never reopen their businesses.

Even with the stimulus packages and social assistance programs, nobody knows if the lost jobs will ever come back.

Vox reported that Goldman Sachs projected gross domestic product (GDP) would fall at a 24% rate in the second quarter this year. According to Goldman Sachs “a decline of this magnitude would be nearly two-and-a-half times the size of the largest quarterly decline in the history of the modern GDP statistics” (6). We are facing a recession that could be worse than 2009.

Both the US and Canadian governments are giving away thousands of dollars per unemployed worker as a result of COVID-19. According to the Canadian Department of Finance website, the Canadian economic response plan aims to provide $2,000 a month for up to four months to workers who lost their income as a result of COVID-19 (3). In the US, the $2 trillion CARES Act was signed last week which provides $1,200 per worker, and additional funding for families (4). 

Who is paying for it?

I’m not arguing the validity or necessity of providing emergency funds and assistance to these people in need. As mentioned earlier, these people need money to pay for food for their families.

We constantly hear about the potential loss of life as a result of COVID-19, but mass unemployment and economic collapse will also have casualties. There really are no easy answers in this pandemic.

Although it may seem like this isn’t the time to discuss these things, it’s imperative we think about and discuss the long-term affects and implications of the decisions we make during this pandemic. We need to make decisions with an eye for the future. After all, the legislation passed in the US will cost $2 trillion, and Canada is planning on a record-breaking deficit of $130 billion this year (5).

We cannot continue giving cheques without any recourse. There are only two real options in regard to how we are going to pay for this:

  1.  Tax increases on the wealthy and middle classes

Or,

2. A drastic reduction and overhaul of social programs

Ideally, option 2 is best. A complete overhaul of social programs and wasteful government spending is a step we should have taken decades ago. Foreign aid, arts and corporate subsidies, inflated bureaucracy, and many other areas need to be reassessed and cut. However, this option is extremely unlikely as it entails a sort of self reflection for society and government. It would be difficult to accept cuts to programs a portion of society relies on and/or takes advantage of. The cuts to government programs also would lead to job losses for a large amount for government employees. The short-term would be incredibly difficult for a large amount of people in society. On the other hand, the long-term benefits of such drastic cuts will lead to a smaller government structure and spending. This option places long-term benefits over short-term pain.

Realistically speaking, option 1 is the likely outcome, as it is the easiest option to implement. Raising taxes will also mostly affect the “wealthy” in the short-term, which the vast majority of the population are not a part of. There is already growing resentment against the wealthy class perpetuated by the political left. The tax increases likely wouldn’t be a percentage or two, it would be dramatic increases. The US have already signed a $2 trillion spending bill. It’s likely that the spending won’t stop there, as more and more bills will need to be passed as this pandemic continues.

However, after we raise taxes, what then? Are the wealthy going to sit back and watch as government confiscates more and more of their wealth? Are corporations going to continue to hire workers? Will corporations pass along their tax increases down to the consumers? Are corporations even going to stay? These are the long-term ramifications of option 1. These are also grounds for increased socialism and the eventuality of communism.

We already see the power and scope of government increasing. We are even now seeing civil liberties and privacy evaporate in front of our eyes.

The famed libertarian economist Milton Friedman explained it best when he wrote “nothing is so permanent as a temporary government program.” Government programs have a habit of being introduced as a “temporary” measure, but end up being permanent. In the UK, income tax was a temporary measure in order to fund the war against Napoleon. The tax is still in place today. In the beginning of the 19th century, Germany introduced a sparkling win tax (Sektsteuer) in order to finance their war fleet. The German fleet is now at the bottom of the ocean, but the tax is still in place. During the Great Depression, the US government passed the Agricultural Adjustment Act, which provided subsidies to farmers facing economic struggles. In 1938, this bill was replaced by the Soil Conservation and Domestic Allotment Act. The Great Depression ended but the subsidies for farmers continued to grow.

It’s difficult to give people money and/or subsidies, then take it away from them. That will be the difficulty in stopping these COVID-19 related payments to workers out of work. Many experts and government officials believe this lockdown will continue for twelve weeks and potentially beyond. If people are receiving payments for three months to stay at home, will they even have a will to work? How will productivity be affected by this? It may be that we become lazier as a society. It’s easy to view these relief payments as “free” money. This would, again, be a breeding ground for socialism. We’ll have politicians advocating to keep the COVID-19 relief payments and that only a few need to actually work.

In the eleventh hour, Speaker of the House Nancy Pelosi attempted to add leftist provisions in the CARES Act. Fortunately, not many of her provisions made it in. However, a fourth relief package is being planned by congress, and we should expect more unrelated government expansions and overreach in it. According to the National Review, Pelosi originally wanted to add:

  • Reduction of student loan debt by $10,000 per borrower
  • Permanently expand Affordable Care Act premium subsidies
  • Forgive all the U.S. Postal Services debt’
  • Make the Child Tax Credit (CTC) fully refundable for the next 6 years
  • Increase the size of the CTC by $1,600 for children under the age of 6
  • Bail out multi employer pension plans that were failing prior to the crisis
  • Temporarily expand dependent care tax breaks (7)

The Democrats have already stated that this is the perfect time to impose their agenda on America. The House Majority Whip, Rep. James Clyburn, stated that this crisis is a “tremendous opportunity to restructure things to fit our vision” (8).

What vision is that, exactly? Judging by the Democrat talking points, it’s class warfare and all-out socialism.

It is imperative we have an eye on the future. We need to talk about how we’re going to pay for these stimulus packages and the long-term affects. It’s absolutely irresponsible if we don’t.

But then again, when has government ever really been responsible?

Sources:

  1. https://globalnews.ca/news/6726202/coronavirus-canada-job-loss-poll/
  2. https://www.theglobeandmail.com/politics/article-trudeau-says-new-merged-benefits-will-help-workers-affected-by-covid/
  3. https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals
  4. https://www.cnbc.com/2020/04/01/whos-eligible-for-covid-19-stimulus-checks-your-questions-answered.html $1200
  5. https://www.thepostmillennial.com/trudeau-government-to-reach-record-breaking-130-billion-deficit?fbclid=IwAR3fEcmRZIxT87HlrAh83btUO7U84kfS_os8NFqy_ykudVLyxJ0eLuWV11k
  6. https://www.vox.com/2020/3/23/21188900/coronavirus-stock-market-recession-depression-trump-jobs-unemployment
  7. https://www.nationalreview.com/corner/the-problems-with-the-democrats-new-proposal/
  8. https://www.washingtontimes.com/news/2020/mar/28/how-democrats-are-wrongly-taking-advantage-of-the-/

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