Post-Covid Warning: Fence Federal Regulation and Spending Before the Next Economic Shock
Does it make sense as an ongoing tenet of public policy to regard a few weeks or months of business disruption, like that characterizing the outset of Covid-19, as capable of destroying major corporations, necessitating Cyclopean-scale government interventions that change the very nature of competitive enterprise and capitalism?
This is the third, not the first, major economic calamity of the 21st Century. Our response is something not imposed on us, but that we do for or to ourselves. So far, our policy reactions can and have expanded dependency and permanent government itself; conversely they could have and still can expand enterprise-based renewal and resiliency.
As a simple point of observation, if any entities should have been resilient with months, even years, of reserve funds and not required manmade flash-policy intervention, it would be major corporations, those among literally the richest institutions on the planet.
They are richer, certainly, than the bankrupt governments bailing them out.
Assuredly, the fears of the less well-heeled non-titans like the restaurant and bar industries were justified given the nature of a pandemic. Ditto small and medium businesses struck down, though thankfully not as many as predicted.
But it is notable to recall for our Monday-morning quarterbacking that the U.S. Chamber of Commerce and corporate trade groups lost no time in early March 2020 sending urgent letters to Congress in support of the CARES Act (“Coronavirus Aid, Relief, and Economic Security Act“) and concurrent relief appeals. A less-rattled National Federation of Independent Business was more circumspect, not to mention prescient, about differential effects the virus would have on members. The NFIB noted members’ proactive steps like stocking disinfectant and hand sanitizer, discussing sick leave and work-from-home options with employees, modifying supply chains and changing buyers or vendors. Even without the benefit of hindsight, that some information- and online-based sectors would “perversely” thrive from lockdown was apparent.
The multi-trillion-dollar CARES Act’s enablement of discretionary deployment of public funds to support individual private businesses was unprecedented. Less appreciated, and a scourge of the administrative state, is that the deeply entrenched pre-existing business and corporate regulatory environment enabled this very over-reach, with Republicans relenting to unbounded spending, loan guarantees and industrial policy. Without embrace of an alternative mentality our descendants will be rendered further unable to resist a non-government-centric response to future downturns and crises. As was apparent early in 2020, some—from Canada’s Justin Trudeau, to the World Economic Forum to the current occupant of the White House—see this as a feature not a bug, gleefully contemplating what they call “reset” and “build back better.”
The federal government in 2020 assumed great power in deciding who gets supported and survives, even while in other respects state government lockdowns were closing businesses. While companies and critical infrastructure functions have been bailed out before, then-Treasury Secretary Stephen Mnuchin assumed awesome powers, even participating in negotiations regarding their scope, over the dispensation of hundreds of billions of public funds in collateralized loans and loans to private businesses, some to be forgiven. These were powers Mnuchin was equally capable of unilaterally taking away.
Vital power of the market was transferred to government, as the Federal Reserve began allocating capital not just in the “traditional” form of its loans to banks, but of loans to individual businesses, extending credit and buying corporate debt; that is, picking winners and losers. Somewhere along the way, the Federal Reserve assumed ownership of almost a third of mortgage securities. Two professors in the Wall Street Journal referred to the swamping of private lending as “the largest step toward a centrally planned economy the U.S. has ever taken.”
These and more represent concessions from which there is no turning back without a lucid response that places top priority on advance preparation for the next inevitable crisis to befall the U.S. (perhaps globe). Instead, the steps being taken expand government, compound non-resilience and, one must conclude, deliberately induce a more dependent population, as incomprehensible as that seems. The latter debasement of the citizenry is why changes will require, among so much else, punitive measures for policymakers that exploit crises in naked fashion.
Read the full article at Forbes.