State Government Checks: Appropriate Taxpayer Relief, but Not Stimulus | Beaufort County Now | Republican leaders in the North Carolina General Assembly are promoting the idea of sending North Carolinians a check, as a means to help us weather the economic fallout from the coronavirus pandemic. | civitas, state government, checks, stimulus, taxpayer relief, march 23, 2020

Coronavirus Disease 2019 (COVID-19)

State Government Checks: Appropriate Taxpayer Relief, but Not Stimulus

Publisher's note: This post, by Brian Balfour, was originally published in Civitas's online edition.

    Republican leaders in the North Carolina General Assembly are promoting the idea of sending North Carolinians a check, as a means to help us weather the economic fallout from the coronavirus pandemic.

    I support the idea, but disagree with the assertion that government checks are an effective tool to "stimulate" the economy.

    Senators Ralph Hise (R-Rutherford) and Ted Alexander (R-Gaston) penned an article published in the Charlotte Observer and Raleigh News & Observer advocating for the measure. The article was highlighted in a press release put out by the office of Senate President Pro Tem Phil Berger.

    No legislation has been introduced yet, so the plan is still short on details, but the message is crystal clear.

    State government should announce "a broad stimulus package that would, in effect, send one-time cash to North Carolinians using the substantial surplus we've accumulated," wrote Hise and Alexander.

    First, conservative legislators should be praised for the fiscally-responsible decisions over the last decade which enabled state government to build up roughly $1.2 billion in its rainy day fund. As Hise and Alexander wrote, "We have the means for a proportionate response to an economic disruption. Times like this are exactly why."

    Add to the $1.2 billion in rainy day funds another $1.5 billion in saved "non-reverting Department Funds," and North Carolina is far better positioned to confront the coming fiscal fallout than we were when the Great Recession hit over a decade ago. More measures will likely be needed to fill the massive budget hole that is coming, and that will be addressed in a future article.

    Hise and Alexander also write that the state government checks would be paired with a plan to "adjust" the state's unemployment insurance program "to deliver acute assistance to those who most need it." The UI program has surplus savings of about $3.9 billion, so it is well positioned to respond as well.

    Returning money to taxpayers is certainly a laudable measure, and I applaud it. Government mandates like closing bars, restaurants and schools are causing a major disruption to the economy, so government should also offer a financial bridge for those impacted.

    The laid off waitress struggling to pay rent without a paycheck, or the baggage handler that finds himself out of work and needing some funds to pay down credit card debt will benefit tremendously from this financial lifeline.

    Assisting households to get through this hopefully temporary rough patch will provide much-needed economic relief. It's the right thing to do.

    But that's what this check would be: relief.

    It would not be a "stimulus package" that would "prime the economy's engine," as Hise and Alexander say.

    The authors recognize how problematic "Supply chain interruptions" have been to the economy, due to factories in China and other parts of the world shutting down to avoid further spread of the COVID-19 virus. Sending households a check won't fix that, getting workers healthy again will.

    Hise and Alexander further emphasize their desire to "boost demand" by putting more money in the hands of consumers. But this one-time potential boost in demand won't encourage businesses to invest in expanding and hiring more workers. There's far too much uncertainty right now, and businesses simply will not adjust their long-term plans based on a very temporary (and likely minor) boost in consumer demand.

    Moreover, government checks being sent to consumers will not magically translate into an increase of productivity or more goods and services being produced. It won't put workers that are being required to stay home and distance themselves back in factories or offices. It won't enable parents who are forced to stay home and care for their kids because their daycares are closed to get back to work.

    Sending government checks also won't encourage those consumers who are afraid of physical contact with others to go out and spend.

    The notion that government should try to "boost demand" during economic downturns is textbook left-wing Keynesian policy that conservative, market-friendly legislators typically scorn. They shouldn't let sound economics fall prey to panic.

    Returning tax money to North Carolinians whose jobs have been adversely impacted by coronavirus may be the right thing to do. But it is a safety net measure, not a stimulus.

    Understanding the difference is crucial. And it's a difference that should not be ignored.


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