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Economic Stimulus: Take Care Of The Little Guys First

Coronavirus stimulus
Tyler Olson and John Roberts of Fox News reported that the White House is pushing a third coronavirus stimulus package with a price tag of about $850 billion, largely in the form of tax relief measures.

This third coronavirus spending package worth hundreds of billions of dollars is being circulated even before the Senate has finished work on a more modest second relief bill that focuses on leave for workers and expedited testing for COVID-19.

According to Olson and Roberts, roughly $500 billion of this would be tied to a payroll tax cut, while $250 billion would come in the form of Small Business Administration loans and another $58 billion would be directed to the airline industry, among other potential industry bailouts.

"I’m not going to comment on the numbers now. But it’s a big number," Treasury Secretary Steven Mnuchin told reporters Monday night.

Most conservatives will be skeptical of – if not completely opposed to – this massive spending package.

Many will frame their skepticism or opposition based on concerns about adding this staggering amount to an already staggering national debt, but our take is different.

Our concern is that, like most government interventions in the economy, this infusion of taxpayer dollars is going to the wrong place.

Back in 2009, when I served as Director of Communications for then-Representative Jeb Hensarling, Jeb wrote an op-ed for the Wall Street Journal explaining why, with unemployment sitting at a generational high of 10.2 percent, the Obama economic stimulus passed in response to the 2006 housing crash failed to ignite the anticipated recovery:

[Regarding the economic stimulus package signed into law by President Barack Obama in February.] Even among previous stimulus efforts, the 2009 stimulus stands out for its ineffective targeting and sheer size. With interest, it is $1.1 trillion, double the size of Roosevelt's New Deal spending as a percentage of GDP.

Virtually none of the stimulus spending was directed towards encouraging broad-based private investment, and thus failed to encourage true economic growth. An analysis by economists John F. Cogan, John B. Taylor and Volker Wieland, published on this page on Sept. 17, suggests that while the stimulus succeeded in temporarily and marginally increasing disposable personal income, it left personal consumption spending virtually unchanged.

Meanwhile, $112 billion of its $300 billion tax relief was in the form of payments to people who paid no income taxes. These payments, akin to a one-time welfare check, do not change the incentives to save and invest, and do not effectively promote broad-based economic growth.

Translation: The government stimulus money went to the wrong people in the wrong form to stimulate an economic recovery.

While we don’t know all the details of the White House package, it is increasingly clear that Washington’s Big Business-centric policymakers are missing the most crucial point of the current coronavirus-driven economic crisis – the abrupt halt in small business cash flow brought on by the epidemic.

An employment tax cut or other tax relief to be recognized off in the future is of little help to a small business forced to close by government decree that is still liable TODAY for fixed expenses, such as rent, debt service, utilities, etc.

And Washington’s policymakers shouldn’t be blinded by the swarm of Big Business lobbyists looking for bailout money, getting small business through this crisis is the key to a robust economic recovery, and to President Trump’s re-election.

According to data from the Census Bureau’s Annual Survey of Entrepreneurs, there are 30.2 million small businesses in this country. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses; firms with fewer than 100 workers accounted for 98.2 percent and firms with fewer than 20 workers made up 89.0 percent.

United States small businesses employ about 60 million people, or 47.3 percent of the private workforce. And small business has been a big part of the Trump economic boom: The Small Business Administration says the number of small business proprietors increased by 1.9 percent and small business created 1.8 million net jobs, with firms employing fewer than 20 employees experiencing the largest gains adding 1.2 million net jobs.

These small businesses, which employ almost half of America’s workers, are the businesses that can least afford an abrupt interruption in cash flow because they are often undercapitalized to begin with. The average amount of a small business startup’s capital is $10,000; 64 percent of small businesses are started with less than $10,000, and the median income for a small business owner is $59,000.

There’s no cushion or rainy-day fund for most small business owners or their employees.

And there’s one other thing that President Trump’s advisors and Republican Senators should not ignore – the politics of who gets bailed-out and how and when they get helped.

In a recent survey of small business when asked what US political party most closely represents their political views, 41 percent of small business owners answered Republican, while 29 percent answered Democrat. And other data suggests that those businesses and their employees and owners are more concentrated in Republican and Trump-supporting states.

If the President and his advisors and Capitol Hill’s GOP policymakers really want to ensure that the American economy bounces back quickly and robustly from the economic damage inflicted by the COVID-19 epidemic their first and most important job is to quickly get cash into the small business economy, nothing else will be more important now, or on Election Day.

George Rasley is editor of Richard Viguerie's and is a veteran of over 300 political campaigns. A member of American MENSA, he served on the staff of Vice President Dan Quayle, as Director of Policy and Communication for former Congressman Adam Putnam (FL-12) then Vice Chairman of the Oversight and Government Reform Committee's Subcommittee on National Security and Foreign Affairs, as spokesman for Rep. Mac Thornberry, former Chairman of the House Armed Services Committee, and as Director of Communications for former Rep. Jeb Hensarling, formerly Chairman of the House Financial Services Committee.

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