The Economy may be Immune to Government Stimulus
Article from For Liberty by Norm Leahy.
There’s a hue and cry for the federal government to embrace some sort of fiscal stimulus to ensure the nation’s economy isn’t completely tanked by a virus (and the resultant panic),
But as Nicole Gelinas writes in the New York Post that after more than a decade of easy monetary policy, and raging federal deficits, the U.S. economy may be immune to even more of the same:
Rate cuts to induce people and companies to borrow more? American families have already maxed out their credit cards.
This isn’t a metaphor for something; they have literally maxed out their credit cards, owing $4.1 trillion on consumer debt other than mortgages, up from $3.2 trillion in 2008 (after adjusting for inflation). Even before coronavirus, delinquency rates on this type of debt were inching up.
OK, well, what about fiscal stimulus? That is, instead of cutting rates to induce people to borrow more, the government could do that borrowing itself, and then give people the money directly. Last week, President Trump suggested a payroll-tax cut, which is exactly that.
With a trillion-dollar annual budget deficit, though, long before the virus hit, the government is already doing that, too, and has been for years.
Even so, the government will do something – anything – in an attempt to soothe markets, restore confidence, or simply to look busy.
The result may very well be even higher annual deficits and an even more swollen debt. But as a nation, we seem addicted to the debt, or at least thoroughly numb to its effects and consequences.
Future generations, who will have to pay all this borrowed money back, will judge if we were fools or knaves.
Image Credit: By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons