ComingTogether Plan

The America Rescue Plan Act was passed and signed into law earlier this month. Another bad short-term response to long-term issues.

The two lead items in most reports are a $1,400 per person payment and continuing the temporary increase in unemployment benefits – both requiring people to be unproductive in order to obtain the money. The means testing of benefits has got to go to incentivize productivity. Furthermore, the unemployment benefits were made more valuable since they are no longer taxable income, further reducing the incentive to be employed. I presume that is why so many businesses are having trouble finding employees; it pays so much better to not work.

It is sad that this $1,400 per person payment is just temporary support offered the citizens of this country, when this current situation is a chance to meaningfully reform government benefits. How long will $1,400 last? Then what? We need to decide as a country that no citizen is to go without certain basic resources — food, housing, medicine for examples. To do that, let’s provide benefits to every citizen. No waiting for some bureaucrat to decide you are worthy. No insecurity that you might do some otherwise reasonable activity that terminates the benefits.

A third flaw is found in the size of the bill. The $1,400 payment that gets the most press is less than a quarter of the amount appropriated. Generally, a temporary relief bill to get past a temporary disaster should not be larger than the lost economic activity. That tends to be quite inflationary, and shows that the bill is not really about relief. Even Larry Summers, a very liberal economist who was the Secretary of the Treasury under Clinton, uses this criteria to say that the bill is way too big. He suggest a maximum of $380 billion, or a little less than the direct payments to the citizens. See https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/.

Fourth, this bill includes so many things not related to COVID. Examples:

• Reduce flexibility of GI Bill education benefits.
• Aid to state and local governments when their revenues are only down .4% (Wall Street Journal, 3/13/2021) — certainly an amount that any budget should be able to handle as out of contingency funds.
• Doubling down on Obamacare, trying to rescue that failed program.
• $270 million to the National Endowment for the Arts and National Endowment for the Humanities.
• $50 million to the Environmental Protection Agency while lower economic activity has reduced pollution.
• $50 million to family planning services as outlined in Title X.

Fifth, we see that this bill shows that our representatives value teacher unions over the actual education of our children. This bill only supports government-run schools at a time when the pandemic has revealed the flaws of those schools to so many parents. Further evidence that this is not about the pandemic is that the aid to schools can run through 2024 — long after the pandemic is expected to be over. Note that schools have not yet spent all the money from pervious stimulus bills (Kiplinger Letter 2/26/2021).

This bill also increases the child tax credit. Again, this benefit is means tested, temporary, and there is no requirement to spend it on basic needs. We also would prefer to see an agency other than the IRS distributing benefits. They are not known as compassionate or timely — both important characteristics of agencies distributing benefits. (Note Romney’s recent proposal for child benefits would fix this last issue.)

Another bad short-term response to long-term issues. The massive bill was passed Monday that is being referred to in the media as a stimulus bill. It seems like the 116th Congress is trying to recover from their appalling lack of productivity over the last two years all in one 5500 page bill.

The two lead items in most reports are a $600 per person payment and another temporary increase in unemployment benefits – both requiring people to be unproductive in order to obtain the money. The means testing of benefits has got to go to incentivize productivity.

It is sad that this is just temporary  support offered the citizens of this country, when this current situation is a chance to meaningfully reform government benefits. For the 54 million people that are considered “food insecure”, how long will $600 last? We need to decide as a country that no citizen is to go hungry. To do that, let’s provide a food benefit to every citizen. No waiting for some bureaucrat to decide you are worthy. No insecurity that you might do some otherwise reasonable activity that terminates the benefits.

A third flaw is found in the moratorium on evictions. It is not that we do not want people to be housed. The complaint is that this provision is an unfunded mandate that causes a significant burden on landlords. This moratorium means that those providing housing have to continue providing it whether they are paid or not. It is probably already too difficult to evict for nonpayment, but this makes it worse. Now, how many people considering going into the housing rental business will decide that is a bad idea, since renters do not need to pay. Once this precedent has been set, expect less housing to be available, particularly at reasonable pricing — not the desired outcome. Again, we do not want to see any citizen without housing, so let’s provide a housing benefit for every citizen. Then landlords know that a certain amount of money will be available to pay rent.

Update 12/23/2020: The President agrees with this article that $600 per person is inadequate. He proposes amending the bill to provide $2,000. Rather than increasing the amount, how about making this a monthly payment and eliminate the means testing? That would eliminate the “food insecurity”. It could provide some protection to landlords by requiring that part of this money be used for rent, say ½ or ⅔, to obtain a deferral of eviction.

Congress is currently considering another bill in response to the COVID-19 pandemic. We have another article on why these bills would have been much less necessary if the ComingTogether Plan was in place. However, given that nothing like it is currently available, there is one aspect of the Plan that could be put in place fairly quickly if Congress would put it in the next bill. That is the Education Benefit.

Many have spoken of the need to help state and local governments due to increased expenses and lower tax revenue. One of the major costs paid by state and local government is education. If the education benefit were implemented now, that benefit would direct significant funding to schools, reducing the expenses borne by those governments.

To get this benefit up and running quickly, the process of paying the benefit would be modified from the original ComingTogether Plan. Basically, each accredited school or home school curriculum provider would send to the government a list, via Internet, of the citizens enrolled in their schools, say on the 1st of each month for September through December and February through May. The list would include the Social Security number, name, birthdate, and grade level for each student. There would be two simple (for computers) checks on this data: 1) The name, birthdate, and Social Security number must match the records of the Social Security Administration, and 2) the data would be checked for duplicates. Any person listed on more than one school’s report would be disqualified for both schools, and any duplicate grade level and month for a particular student would not be paid. After eliminating any disqualified students, a payment would be made to each school in the amount of the monthly benefit multiplied by the number of qualified students enrolled on the first day of the month. That should be able to be done by the end of the month.

This system is simple enough that if this bill were passed in the next few days, benefits could be being paid by November. Note that due to unnecessary complications, most of the benefits in earlier relief bills have not yet been paid. We wish to avoid that. Keep it simple, and keep it fair by treating every citizen the same way.

We would hope that with this benefit up and running, Congress would in 2021 implement the tax reform specified in the ComingTogether Plan to cover the cost of this benefit starting in 2022.

We are proposing a monthly benefit of $500 per month per qualified student. News media has reported estimates ranging from $400 to $2,300 per student of additional costs per student due to COVID-19, so $4,000 per year should more than cover those special expenses and still provide additional revenue to schools to mitigate the lower tax revenues being received by state and local governments.

We were gratified recently to learn of the Arizona Empowerment Scholarship Account program. This provides a debit card that accesses a bank account funded by the state government that can be used to pay educational expenses. This sounds exactly like the ComingTogether Plan’s Education Benefit, although it is being provided at the state level rather than the federal level.

It is a start, but it does not go far enough. (more…)