That stimulus money will have to be repaid

This post was published in the Wilson Times May 1, 2020.

If you’re pleased with your pandemic stimulus check, just wait until the payments come due. As someone who paid federal taxes last year, you qualified for a $1,200 stimulus check; you don’t even have to sign away all your privacy rights. If you gave up your bank account number, you get a direct deposit into your account instead of a paper check with Donald J. Trump’s name on it.

Do a little math, though. If everyone is getting $1,200 ($2,400 for two-earner households), how much money does that total, and where is it coming from? The stimulus checks sent to individual taxpayers were part of a $3 trillion bill that included payments to small businesses, supplemental unemployment payments, cash for state and local governments and hospitals. The individual checks were estimated at about $209 billion.

This generosity comes on the heels of the 2017 tax cuts, which added more than $1 trillion to the budget deficit, even as the economy was bursting at the seams and little of the tax cuts went to people who would spend it on basics.

If these numbers sound familiar, you may recall an earlier stimulus package in 2008-09, which involved payments and tax changes boosted by the Bush and Obama administrations. In addition to one-time payments of up to $1,200 for couples, plus $300 per child, this stimulus included a pause in payroll taxes (that support Social Security and Medicare with 6% of wages). The Bush administration spent $120 billion to prop up the economy.

The money must have helped, although surveys showed a lot of recipients saved their stimulus money instead of spending it as intended. Even so, the economy had been zooming for a decade until the Corona Virus pandemic caused an economic collapse.

Because this year’s stimulus package was financed with borrowed money, this fiscal year’s federal budget deficit is expected to be $3.7 trillion. That’s 3,700,000,000,000 dollars. It’s more money than you can imagine. As Everett Dirksen famously said, “A billion here, a billion there, pretty soon you’re talking real money.”

The government’s stimulus package in the 2008-09 Great Recession and the current economic reactions to the COVID-19 pandemic were needed to prevent a total collapse of the global economy. But neither Congress nor the White House sought to offset the stimulus with tax increases or spending cuts. Annual deficits have increased the national debt and debt-to-income ratio to near-suicidal levels.

The relief package for America’s worst depression, in the 1930s, included government jobs to put people (mostly men) back to work in an economy that had no job openings. The Civilian Conservation Corps and the Works Progress Administration built or improved roads, national parks and buildings, including the Wilson County Public Library, a WPA project. In 1936, the federal deficit was $4 billion. In that case, the federal stimulus created an asset — government buildings, roads and parks — that added to the government’s worth.

We’ll never go back to the pre-New Deal federal budgeting, but the deficits we’ve run up every year since 2000 will have to be repaid by our children and grandchildren. The federal debt at the end of World War II was $259 billion. It has not fallen below $300 billion since 1962. This year, it is expected to top $24 trillion — more than the total value of the nation’s output (GDP).

Enjoy your stimulus check, or give it away to charities in need. But you might want to have a talk with your grandchildren. They (and their grandchildren) will have to pay for the nation’s stimulated economy.