StatGuy2000 said:
Non-essential businesses are unable to provide goods and services physically, but there are many businesses that are still able to provide goods and services online. I've recently ordered many items (yarn, books, clothing) entirely online. And spending on goods and services online also spur economic growth as well.
But again, this isn't a recession that can be dealt with on a level of bulk statistics, its one of classes of businesses being destroyed by forced closure/restriction. The idea of general stimulus is that it can ultimately help every kind of business, though particularly discretionary/non-essential spending ones (because they are hardest hit). You don't need or necessarily even want to target the spending. That's why general payments and tax credits work well in a normal recession. You hope that giving people more money to spend will mean they spend it and fewer businesses will fail. Theoretically if you give people enough money, the economy will keep running as normal and the recession won't even happen. The reason the difference here matters is:
1. It isn't possible to spend enough via stimulus to keep certain businesses from failing, because they are legally required to be closed or otherwise restrict their operations.
2. Because of #1 it isn't mathematically/physically possible to spend enough to level-off the recession/depression. Theoretically you could spend enough to cause other companies to do better, but the economy couldn't pivot like that. Hairdressers aren't going to go get construction jobs.
That's why much of the stimulus was targeted at unemployed people and at-risk businesses rather than general stimulus (and though there was some general stimulus, it didn't really do much good).
Also, you are incorrect about people not being able to spend money on restaurants. They are not able to physically go to a restaurant. But restaurants are still open for takeout and delivery in both Canada and the US.
Restaurants capable of pivoting to a takeout-only model can stay open in a limited capacity, but as I think you are probably aware:
1. The point and profit driver of most restaurants is the dining room. It's only certain specific types of restaurants that tend to do well in a takeout mode (Pizza, Chinese, fast food). Saying they can stay open in a takeout mode doesn't help if people don't come and doesn't help the dining room staff that has to be laid-off.
2. I think you probably recognize that there's no point in splitting the hair that they are only forced to shut the dining room and not the restaurant per se, it doesn't help them if they can't pivot. Also, I'm sure you are aware that restaurants are only one of many types of businesses heavily impacted by legal restrictions on their operations.
This objection is unnecessarily argumentative.
Given the numbers of asymptomatic cases of those infected with the SARS-COV2 virus, I have always felt it was unrealistic that new case counts would crash. In the US, the ineffective response of governments (both federal and state) have postponed the recovery, but I believe we are now seeing some progress in a gradual reduction of new cases.
In my county as measured by phone GPS tracking we had a 96% reduction in individual travel a few weeks into the shutdown. Regardless of any government folly to get us to that point, to me that's a pretty stunning success. I expected it to be reflected in the case counts, but I was wrong.
The death rate, however, is about 12% if you shift the data by 2 weeks, which implies we may be missing more than 80% of cases. If that's true, then the peak was higher and the reduction faster. Still, the testing rate has leveled-off and so the trajectory of the past couple weeks pretty much has to be real. It may be reflective of people getting tired of social distancing.
Regardless of the cause, if the current trajectory is real it does not bode well for the future.
Of course costs matter. But you make several fallacies here.
First of all, taxes are not necessarily higher in the US today than they were in the past -- the US was far more heavily taxed during the 1950s and the 1960s than they are now, in terms of both income taxes and taxes on capital gains.
It does depend on what you measure and how you set the baselines. But one noteworthy example is the Social Security (payroll) tax. It's gotten progressively higher over time because it borrowed from the future by its very design. Much of our pre-COVID deficit issues were caused by that money transitioning from just being promised-debt to being real debt. It was only $80 B negative in 2019, but prior to that it had positive outflow, so the delta is actually much larger. (Note: some would say it has a fund that still has money in it, but that belies the fact that the "fund" is just intra-government IOU debt.
Also, while it's true that the federal tax
rate (e.g, excluding the employer portion of the payroll tax, which has risen continuously) has been remarkably flat over time:
https://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households
...that represents an ever-increasing value of taxes paid due to increases in income over time. And even at that, at the peak of the economy last year we were still taking on significant debt, so again, that's borrowing from the future to keep the tax rate lower. E.G., the average tax rate is about 20%, the deficit is 15% of federal income tax, so the tax rate would need to be 23% to eliminate the deficit -- during a strong economy (higher during a weak one).
Second, the money that governments are borrowing today are to mitigate the economic impact of the pandemic. Once the pandemic passes and stimulus is applied to increase economic growth, such economic growth will provide greater revenues which will allow said governments like the US, Canada, and others around the world to essentially pay back that money (assuming governments act responsibly, which I admit is a big if).
In the US we ran a $740B deficit in 2019. Even if we could magically make 2021 look like 2019 economically (impossible), we'd
still need to raise taxes to eliminate that deficit and raise them more to pay back the loss. We're certainly not going to have a better economy in 2021 than we did in 2019, which is what would be needed to avoid raising tax rates while paying down the debt.
And again, I think you are confusing what you
hope will happen with what is likely to happen. I think it is worth noting that the US never did start paying off the debt from the Great Recession in the 10 years since it ended. And for that matter, neither did Canada. I see no reason to expect a rapid change of tune here.
Third, I have always felt that the whole "national debt crisis" rhetoric in the US was greatly misplaced. The US has never been in a position to default on paying its debts (unlike, say, Greece during the 2008-10 economic crises).
That's not a common view. And while you said that the interest on the debt wasn't a big deal due to low interest rates, we were projected to pay $480 B on it this year, or 10% of the federal budget. That's a lot of money that could be spent elsewhere (or not taken from taxpayers).
Fourth, the actions taken by the US government during the 2008-2010 economic crisis set the stage for a strong economic recovery toward the period of 2014-2019. You yourself have posted here on PF about how strong the job market was during that period in time.
We didn't have a strong recovery, we just had a long one. I think it is consensus (and I pointed it out repeatedly) that the recovery was sluggish and high debt load was probably part of the reason why. Also, while we eventually got to a great place, we never did start paying-down the debt we incurred.
Of course it didn't 100% mitigate the loss, but since when has economic recovery from a recession ever done that? That is a straw man argument.
I don't think it is. Your position requires that we have a better 2021 than 2019 (otherwise, how can we expect to be paying back the debt?), not to mention a better recovery from this recession than the last one.
