The Senate has passed a $2.2 trillion aid bill in response to the coronavirus crisis. The bill is expected to be passed quickly by the House and signed by the president.
Members of Congress stuffed a vast array of subsidies in the 880‐page legislation, ranging from $454 billion for big businesses to $25 million for the Kennedy Center in Washington, D.C.
Here are the main spending buckets:
- $454 billion to finance loans to businesses and the states.
- $46 billion in loans and grants to airlines and other specified businesses.
- $377 billion in loans and grants to small businesses.
- $290 billion in stimulus checks for all individuals below an income cutoff.
- $260 billion in expanded unemployment benefits.
- $175 billion in grants to state and local governments.
- $180 billion in health‐related spending.
- $154 billion for education, agriculture, food stamps, housing, and other programs.
- $290 billion in business and individual tax cuts.
Some of the spending is poorly targeted, such as the $1,200 stimulus checks mailed to every lower‐ and middle‐income adult whether unemployed or not. Some of the spending could create harmful incentives, such as the $600 across‐the‐board boost in weekly unemployment benefits, which could encourage companies to lay off workers.
Some of the spending, such as for education and housing, is not properly federal and should have been left to the states. Much of the spending will create a bad precedent for expansive generosity, such as the airline and small business aid programs that are not loans but full cashflow and paycheck protection plans.
Much of the business aid comes with rules that micromanage company operations, such as worker pay and retention requirements and share buyback and dividend restrictions. Some of the business aid may include equity stakes, which is pure socialism. All these interventions make it easier for governments to take similar big‐government actions during normal times.
Some businesses receive special treatment including airlines, farms, and defense contractors such as Boeing. As for the Kennedy Center, its wealthy patrons should be bailing it out, not taxpayers.
All the spending will strengthen the belief that the federal government always comes to the rescue. Many state and local governments have insufficient rainy day funds to deal with crises. Many businesses are heavily indebted and vulnerable to downturns. Many individuals also save too little for short‐term contingencies. American society in general is too heavily leveraged—partly because the welfare state crowds out savings, partly because the tax code encourages consumption and borrowing, and partly because with each crisis the government enacts ever‐larger bailouts.
When the COVID-19 health crisis is over and the economy recovers, policymakers should tackle the massive federal debt, which had already been on an unsustainable path. But it is hard to be optimistic when the last two major crises—9/11 and the 2008 financial crash—prompted vast new spending that was added to the national credit card with no plan to pay it back.