$2.2 Trillion Stimulus Pays Workers More To Stay Home

In its infinite wisdom, Congress designed the recent record $2.2 trillion “stimulus bill” to pay most workers more to stay at home than they would earn if they went back to work. That’s absurd! While I’m one of those who would much rather be working than sitting at home, there are plenty of workers who would jump at the chance to stay home – especially if it pays more than going back to work.

Keeping our economy strong has always been about incentives to work. To keep the country prosperous, our public policies should reward productive behavior rather than punish it. But it is too bad the $2+ trillion stimulus package may do just the opposite, as we’ll see below.

Unemployment benefits are paid by the states and, as such, they can vary widely. Generally speaking, unemployment insurance previously paid around 50% of workers’ pay for four to six months. Yet numerous members of Congress are demanding that the new stimulus bill increase unemployment pay to 100% of what people would have earned on the job. In many circumstances, they can get even more money per month for not returning to work, as I will discuss below.

The thinking among many lawmakers was that with so many people out of work through no fault of their own (coronavirus), their unemployment benefit should increase significantly. I get that.

However, if many in Congress get their way, most unemployed workers will receive not only 100% of their previous wages from their state but also an additional $600 per week over what they were previously making from the federal government. While that sounds absurd, lawmakers were intent on giving workers a clear incentive to stay home and shelter in place.

This policy puts us in danger of a so-called “L shaped” recession where the economy contracts sharply followed by a long period of flat, slow growth as we saw under Barack Obama. That’s instead of a “V shaped” recovery with strong growth, as we saw under Ronald Reagan. This is because workers have no real incentive to get back on the job.

Some argue that the flat growth path may even be the intention of those who are willing to tolerate a recession, if it means getting rid of President Trump in November. Democrats claimed that their expanded unemployment program would grant “only” 100% wage replacement. That by itself is a questionable policy.

But the actual law that Trump signed is even worse. The legislative language that emerged in negotiations with Treasury Secretary Steven Mnuchin had no such limit on payments. Instead, the law sets unemployment benefits for the next 120 to 180 days at the level of state benefits plus an extra $600 a week.

That’s 100% of your pay plus an extra $2,400 a month. That’s a huge raise! Why would anyone go back to work?

Let me be clear: I’m not suggesting that most Americans are lazy. Millions of workers across the country are itching to get back to work and earn a paycheck. I believe the majority of people would surely rather work than collect unemployment.

But this new deal could change all that. Millions of workers in tough jobs, especially, will almost certainly opt to take the money for not working, as long as it lasts. This will add tens of billions of dollars to our budget deficit and deprive many companies of the workers they need. This is an important point to understand because today there are more unfilled job openings than ever.

It also is a matter of fairness. If a construction company has a crew of 100 workers and 50 of them stay on the job, but 50 of them stay home on a paid vacation thanks to Congress, why should those staying home be paid the same – or $600 a week more? How is that fair to the employees working hard 40 hours a week? This is a really bad idea!

There is yet another possible angle: This policy may have been a back-door scheme by Democrats to greatly raise the minimum wage. Employers could, in many cases, be forced to pay in effect a minimum wage hike to around $23 an hour – even higher than what Bernie Sanders wants – or more, to lure employees to start working again.

Thus, for many businesses, that will mean they simply will be unable to afford to hire people, right at the time they start to get moving again as the economy reopens. This will certainly stall out much needed economic growth just ahead.

But here’s the saddest part. This latest unemployment benefit boom is scheduled to last only for four to six months, when it is supposed to come to an end. However, it is my bet that the Democrats in Washington will start a vigorous push to make these changes permanent when the expanded relief payments end. Yep, you heard it here first!

And given that this is an election year, Republicans will have a hard time fighting to stop a permanent enactment of this huge unemployment increase. While such an increase is bad for the economy and jobs in the long-term, it is politically favorable for the Democrats between now and the election. While they know in their hearts it’s ultimately bad for the economy, they’ll do it in their relentless effort to get rid of Donald Trump.

At the end of the day, it’s all about buying votes – regardless of the impact on the economy. What else is new?

Whether you’re a Democrat, Republican or Independent, you should oppose this!

One Response to $2.2 Trillion Stimulus Pays Workers More To Stay Home

  1. The stupidity of our representatives is amazing. From shutting down our booming economy to MAYBE save a few lives when you add back the increasing number of suicides and drug use and domestic violence deaths from people being unable to work or leave the house for weeks on end.