Wallace Stegner once said, “There is a sense in which we are all each other’s consequences.” His was a sobering perspective on choices and the human condition — wisdom of the ages from one of our nation’s great novelists and historians, and one of Utah’s adopted sons.
Policymakers deal with the existential reality Stegner described in a magnified way. The decisions they make shape the tomorrow we all will inherit. It is one of the reasons great leaders of the past remain relevant decades or centuries later: we believe their decisions, though made long ago, still affect us. And so we look to how they did things as we make our own way.
But sometimes something new happens and history doesn’t provide a reliable guide. Enter COVID-19. Among its many impacts, the virus has led to a global economic shock different from anything seen before. Unsurprisingly, Congress’s response has been to deploy economic tools in equally unprecedented ways.
And by economic tools, I mean stimulus. Loads of it. $3.2 trillion and counting. That’s more than two years of our nation’s discretionary budget injected into the economy over the course of a few short weeks. It’s like an adrenaline shot in the veins of an action hero who just took a bullet in the shoulder and seemed down for the count. Pow! The question is whether the adrenaline will make a difference long term or simply get us through the next fight scene.
While it is clearly too early to know for certain, the fact that we are several weeks into the crisis gives us an opportunity to pause and look at possible consequences, with respect to at least a few of the most significant programs.
Stimulus checks. Helicopter money is an idea for invigorating a stagnant economy that has been out there for some time, but never really done before — at least not in the U.S. Yet, after a few days of debate, Congress pushed this one out the door, and most Americans are now getting free money, no strings attached, unconditioned on need or purpose. Here is money, go spend it — probably on toilet paper and hand sanitizer. Will it make a lasting difference to the economy? Maybe. If there was ever going to be a time to try it, now seems as good as any.
The Paycheck Protection Program. In one stroke, the well-designed PPP both keeps people employed and maintains small businesses intact so they are ready to pick up where they left off as the crisis recedes. Admittedly, the rollout has felt a bit like an Oklahoma land-rush scene. Remember Tom Cruise and Nicole Kidman punching and elbowing their way to their own little promised land in the movie “Far and Away”? Like the PPP, it was free property for the taking, under a first-come, first-served government program that favored the clever and the lucky.
Rollout quibbles aside, will the PPP work? If the economy is largely restored in coming months I believe in hindsight this will be viewed as a brilliant, fit-for-purpose program. Businesses will have been sustained through a relatively short economic shock. However, if we are facing an extended period of uncertainty, and the shape of the economy becomes meaningfully different in the future than it has been in the past (both which seem equally possible), the success of the program will be mixed, as supply chains and industries reshuffle, and too many businesses will be left behind notwithstanding the stimulus.
Main Street Lending Facility. Many of Utah’s key employers are too large to participate in the PPP but not large enough to benefit from Wall Street-focused initiatives that were quickly implemented by the Federal Reserve. These are the mid-sized employers that provide thousands and thousands of skilled and professional jobs in our state. Their significance cannot be overstated, and yet many face difficult decisions as they weigh how to get through the crisis.
The intended lifeline for them is a recently announced, Federal Reserve-backed $600 billion set of loan facilities that would be made available through FDIC insured banks. As of a few days ago, these facilities were not up and running, but an outline of them was put out by the Fed two weeks ago and feedback solicited. The Fed reportedly received over 2,000 comments in just a few days. Yes, the program has deficiencies. In my view, the Fed took a narrow, templatized approach to determining eligibility, and added several strings to boot. Their goal seemed to be prioritizing credit-worthiness and protection of federal funds over saving of jobs.
Of course, federal funds need to be carefully managed, but it’s odd that more flexibility wasn’t provided (as it was with the PPP in spades) to incentivize employers to take the money and maintain operations rather than doing layoffs and going into hibernation mode. The Main Street Lending program has the potential to do a lot of good, but the Fed needs to shift its focus to preserving the needed jobs these companies provide.
Someday, we will look backwards and this will all be relatively clear. We’ll see the consequences of these innovative and incredibly expensive programs for better or worse. For now, it seems they still have the potential to preserve the economy if implemented correctly. If they do, they will be worth every penny.
Troy Keller, an attorney at Dorsey & Whitney LLP, advises companies on corporate law matters and government relations strategies.