Editorial: Target stimulus cash to those hit hardest

The Detroit News

The Trump administration’s instincts to head off a COVID-19 related recession by stimulating the economy are welcome, but scattering vasts amount of tax dollars might not be the most effective vaccine against a slowdown. 

Treasury Secretary Steve Mnuchin is pushing a plan to send checks to American families to encourage them to keep spending through the virus panic. Households of four would get $3,000 now, and another $3,000 later if necessary.

That and other stimulus spending would carry roughly a $500 billion price tag, and would be part of a $1 trillion package, all of which would go on the national credit card.

Treasury Secretary Steven Mnuchin listens and President Donald Trump arrives to speak with reporters after meeting with Republican lawmakers on Capitol Hill, Tuesday, March 10, 2020, in Washington.

It’s a larger amount than the $787 billion spending spree passed under President Barack Obama to jolt the nation out of the 2009 recession, without much affect.

This time, instead of devoting most of the money to new federal spending, the Trump administration wants to give the bulk of it to Americans to spend themselves. But that approach, too, has a spotty history.

In response to the 2001 recession, President George W. Bush sent checks ranging from $300 to $600 per household to revive consumption. The impact was marginal. 

One-time rebates do little to change consumer behavior. The more effective approach, as witnessed by the Trump tax cuts of 2018, is to permanently and broadly cut tax rates. 

In this instance, even that might not have the stimulating impact the administration seeks. With most Americans isolated in their homes, and restaurants, entertainment venues and stores closed, their options are limited for spending a windfall from the federal government. 

Many may shop online, but that doesn’t help the local businesses that will be most hurt by a slowdown. There's no point transferring $500 billion from the Treasury to Amazon.

Government spending at this stage of the crisis should be targeted at making whole those who are losing their jobs or seeing their businesses, large and small, wither. 

State unemployment funds will need bolstering, as will other assistance programs. Laid-off Americans will need help paying their utility bills and meeting other obligations.

Some critical industries, such as airlines and energy producers, will need access to capital to keep them afloat until demand for their services and products return. Small businesses can benefit from low- or zero-interest loans to bridge them until they can reopen their doors.  

Worker retention tax credits should be put in place to encourage employers to maintain their payrolls through this period of isolation. Banks which were bailed out by taxpayers during the Great Recession, should be encouraged to offer mortgage holidays for those who suddenly find themselves out of work. 

Getting money into the pockets of those who experience real hardship from the virus-related slowdown is the best way to ensure it will be spent, and not tucked away.

There’s room — and the necessity — for the federal government to take strategic, temporary measures to shore up an economy that is teetering toward recession.

But it shouldn’t repeat past mistakes. Just throwing around wads of cash risks leaving the nation with more debt without curing its economic ills.