Prior to COVID-19, the United States was in the midst of a 10-plus-year expansion. While not perfect, the basic structure of the economy was basically sound. If this structure is kept intact, the recovery can be both robust and rapid. If it is allowed to deteriorate, things will inevitably be much worse.
I made this observation during my first speech after businesses began to shut down. I have repeated it literally hundreds of times in subsequent speeches, meetings, columns, interviews, articles, forecasts, newsletters and reports. It’s really an inescapable truism.
The Coronavirus Aid, Relief and Economic Security (CARES) Act helped preserve this vital structure. It provided relief to individuals, small businesses and key industries, which helped to mitigate the fallout from the pandemic and related safety requirements. The Federal Reserve (Fed) response has also been massive.
Since March, trillions of dollars have poured into the economy through monetary and fiscal stimulus, and the Fed has slashed interest rates to basically zero. More than 150 million stimulus checks were sent. Small businesses received about half a trillion dollars in loans. Hard-hit sectors (such as airlines) received assistance. While imperfect in both conception and execution, these initiatives have generally been successful in maintaining the structure to support a strong recovery.
Unfortunately, many provisions of the CARES Act will soon expire or have already. With the end of this relief, we will likely see the recovery stall. Airlines which took advantage of CARES Act assistance are prohibited from laying off workers till Oct. 1, but tens of thousands of layoffs will commence at that time. Nearly one of every six restaurants has closed either long term or permanently, and 40% of operators don’t think their restaurants will survive the next six months without additional support. Many Americans face potential eviction or foreclosure, and families with displaced jobs face food insecurity and other critical issues.
The problem is quite simple: The CARES Act was beneficial but designed for a major displacement of two or three months. We are now at eight months and counting, with major surge threats potentially on the horizon this fall and winter.
Election politics are the primary reason for inaction. However, the CARES Act passed essentially unanimously. Hence, any fear of a challenge from the left for supporting “industry bailouts” or from the right for expanding “social programs” is misplaced. That ship has sailed.
Keeping the structure in place means continuing to help individuals stay in their homes and have enough to eat, small businesses survive and key industries remain viable. The structure is in danger of crumbling, which only prolongs and intensifies the agony. It’s time to put politics aside and, as Sam Houston said, “Do right and risk the consequences.”
Economist Ray Perryman is president and CEO of The Perryman Group, an economic research and analysis firm based in Waco. He was designated Texan of the Year by the Texas Legislative Conference in 2012.