In an ideal world, the federal government would never bail anyone out, whether they’re a large corporation, a state or local government or a foreign country. After all, we’re already spending trillions upon trillions of dollars that we don’t have to resurrect the economy in worthier ways, like helping small businesses and through direct payments to individuals. Regardless of the assumptions of some, the federal government cannot, in fact, print money forever. To be sure, the United States is in a better position to do so than many countries, since the U.S. dollar is currently quite strong and other countries want to invest in it. That enviable position is not a sure thing, though: Continued fiscal irresponsibility on our part could erode the world’s confidence in the U.S. dollar and erode that position. We cannot, in fact, endlessly print money and have it retain the same value.
That’s why it’s important that, even in the midst of a major recession that demands action, we continue to keep a wary eye on the debt and the deficit. So, rather than just spending a lot of money and hoping it works out, we ought to try to be a little smarter about things. When the Paycheck Protection Program was enacted, it didn’t provide for the federal government to simply hand out piles of cash to small businesses that they could use however they like. Instead, it offered a loan program for which they could apply, and which would be forgiven if certain conditions were met. That wasn’t a mistake: On the contrary, that element of the program was inherent in the design. It was a feature, not a bug, and it’s one that we ought to apply to future federal financial assistance to states and large corporations as well.
Large corporations shouldn’t just be getting gobs of taxpayer money with no strings attached; they should have to apply for forgivable loans just as small businesses did. For loans to be forgiven, they should have to meet certain conditions. The specifics might vary by industry, but just like small businesses, they should be required to retain their employees over a certain time period if they want the assistance. They could also be required to keep a certain amount of cash on hand in reserve, so in a future crisis they don’t immediately go begging for a bailout again. If ordinary Americans are supposed to have a few months worth of income as savings, surely an airline, a carmaker or a bank can do the same. Stock buybacks could also be limited for a certain amount of time after the loan, so that companies don’t just use the taxpayer funds to raise their stock price (and, hence, the pay of top executives). These requirements could find widespread bipartisan support, as they both limit abuse of taxpayer funds and encourage corporate responsibility. Moreover, they’re optional: Companies that feel they can get through this crisis without the assistance, or that would rather just pay back the loan in full, don’t need to accept these limitations.
There are other restrictions that could be imposed on companies, but they’d probably be more controversial. Limiting the compensation of executives could be another one, but that would be more popular among liberals than conservatives. Pay raises and health care coverage for lower-wage employees might also be considered, but that would rapidly instigate a messy partisan fight and could prolong the process.
Similarly, state and local governments shouldn’t just automatically be handed federal aid, either. Instead, there should be conditions attached to acceptance of the funds, just as there were in the 2009 stimulus program. So, states should be required to have a certain amount of money in their rainy day funds for a set amount of time after the emergency ends. The aid should also be focused like a laser on plugging current revenue shortfalls and addressing costs directly related to the pandemic. States can be given some latitude in how they use the funds, but it must not be a free-for-all.
The federal government can’t just ignore the economic downturn, but it can’t simply throw money at every problem forever, either. There’s a balance to be found between those extremes, and during a crisis it is more vital than ever that we keep that in mind. It shouldn’t be forgotten that we must not only immediately respond to current events, but we will also need to deal with the fallout from the response for decades to come.
Jim Fossel, a conservative activist from Gardiner, worked for Sen. Susan Collins.
He can be contacted at: jwfossel@gmail.com
Twitter: @jimfossel
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