With Friday marking the official end of the $600-per-week federal unemployment payments, it remains unclear what comes next. Congress is furiously debating whether to extend the boosted benefits and/or reduce them.
To the many families hit hard by business closures and loss of income, and for whom the unemployment boost has been critical, it seems like an easy answer. But the choices facing politicians are not so simple.
First, giving people money costs money. A lot of money. If every one of the 17.5 million unemployed Americans received $600 per week, that would be $21 billion every two weeks. That’s like establishing a new NASA – which costs about $22 billion per year to fund – every two weeks.
Second, with businesses closed and people unemployed, the government has even less money than ever to give away. States are already forecasting lower tax revenues, ranging from a 3% tax revenue decline in Arkansas to 20% in California. Georgia recently reported a more than $1 billion drop in tax collections for the 2019-2020 budget year.
Third, the government has no emergency reserve for this. Government only has debt. Out of the taxes you pay, $400 billion per year is spent just for interest payments on government debt. Any and all extra borrowing for stimulus and federal unemployment will add to that debt and to interest in the future.
Fourth, assurances that we can afford any stimulus package as long as we tax the rich are hiding the fine print. Stripping the 400 richest Americans of their wealth completely would yield a $750 per month stimulus check for one year. The next 400 in line would barely last for a month. “Tax the rich” would morph into “Tax the middle class” very quickly. Just look at Seattle’s newest extra tax on those making more than $150,000, which conveniently excludes government workers.
Fifth, and as many others have argued, $600-per-week unemployment benefits are more than some people made on the job. If you are a rational person, not terribly happy about your job, what would you choose? Safety of home, staying with kids, and getting more money? Or work, not having a place to leave your kids, exposure to COVID, and less money?
Sixth, extending the $600 federal unemployment benefits until unemployment numbers go down could become an infinite extension because unemployment may never sink to earlier numbers even if we beat COVID-19. Many European countries have had double-digit unemployment numbers in part because it pays to be unemployed. The safety net has mutated into a hammock.
Any way politicians look at it, the current situation is difficult. Keep businesses closed and continue giving people money for not going to work, and you will run out of money. Cut the unemployment checks, and many families will suffer. Either choice is painful.
Perhaps we need to start thinking about how to get back to work with COVID. It does not have to be mindless, reckless, unnecessarily dangerous, or pretending COVID does not exist. Perhaps rather than spending trillions on keeping people safe from work, we could let entrepreneurs figure out how to make work safe for people?
And perhaps rather than devoting so much energy on whom to tax, whom to give money to, and what impact it will have on November elections, how about fighting the common enemy that prevents people from working, creating wealth, and collecting a paycheck? That’s a platform many can get behind.
Zilvinas Silenas is president of the Atlanta-based Foundation for Economic Education, a non-profit organization that educates young people across the United States about economic principles and the entrepreneurial spirit.
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