Economist Vance Ginn, who formerly worked in the White House Office of Management and Budget, says the only way to ensure the economy recovers is to allow businesses to reopen and for people to go back to work.
He believes that the stimulus checks sent out by Congress may have been necessary and helpful for their time, but suggests that the funding is more like financial aid and what is currently needed is a return to business.
Ginn is currently chief economist at the Texas Public Policy Foundation, which is considered one of the nation's premier free market think tanks.
In an exclusive interview, Ginn says reopening the economy should be done safely and responsibly, but there are things that can be done to move in the right direction. He suggests cutting or temporarily waiving payroll taxes, replenishing net operating losses, and making the Workplace Recovery Act a tool to help get the economy going not close it down and leave Americans stuck on unemployment benefits with little or no chance of getting back to work.
“We need incentives in place to get people back to work," he said. "I think most people that you talk to want to get back to work. We need to be responsible in opening up the economy as we consider the effects of the coronavirus pandemic. Whenever there is a discussion of another round of financial aid, I do not like to call it a stimulus because it is not stimulating anything. It basically is just holding people up fiscally over a period of time like a financial aid situation.“
Ginn said adding more stimulus aid, as it was constructed in the first round earlier this year, won’t incentivize people to work.
“It just gives out financial aid to hold some people over for a while and if you keep in place the $600 a week increase in unemployment benefits from the federal level that also incentivizes people to not work," he said. "Research shows that more than 60% of people make less working than what they actually do in unemployment benefits right now, which is about $15 an hour for the $600 a week increase and then you add another $10 an hour from what you were getting from the state and that comes out to about $25 an hour in unemployment benefits.
“I think those things were helpful in the early stages of the COVID-19 situation, where people were staying home and they were less mobile because they were fearful of what could happen with the virus, and then you had the state and local governments that shut down society and businesses. And because people couldn’t go to work, maybe that was a good thing initially but things are starting to reopen now and we need to find a way for people to get back to work and for businesses to get operating again.“
The math and data, along with research, lead Ginn to believe that the country should start facing the stark reality that a closed economy for an extended period of time could mean insurmountable debt, coupled with the closure of a multiplicity of small businesses.
“You look at $3 trillion that has already been spent by the federal government, meaning our tax dollars, add in the other money spent to combat the coronavirus and we are looking at a $4 trillion deficit and those numbers we haven’t seen since World War II,” Ginn said. “So there’s no such thing as a free lunch, and we have to consider tradeoffs that are involved with getting the economy going as we deal with this pandemic.
"That is one of the reasons why we’ve been looking at alternatives for Congress and the state and local governments to use to help in the situation.”
A multistep process will help get the economy back on track according to Ginn, and it starts with ending the shutdowns, and by passing the Workplace Recovery Act.
This measure would direct federal funds to assist any business that experienced losses due to the shutdowns out of their control. It would provide the operating cash businesses need to survive and employ workers.
“If there’s a double-dip recession caused by shutdowns due to another wave of COVID-19, then Congress doesn’t need to pass more massive spending bills that bankrupt future generations," he said. "The WRA isn’t a silver bullet, but it will help give Americans confidence that no other legislation yet has. Another step is not raise taxes. I also think that any sort of regulations that have been suspended in this period of time should be up for further review because if they weren’t good in a crisis were they really good otherwise?“
A payroll tax suspension for the employer and employee is another step to help the economy start percolating again according to the foundation and Ginn.
”With that would do is give workers more of an incentive to work and put money in their pocket and also on the other side give the employers the opportunity to hire more people,” Ginn explained.
Time will be a key factor in determining how the economy will recover as Ginn thinks getting a better handle on data regarding the pandemic will be a key factor.
“There’s so much reporting about the number of cases without knowing the demographics of those cases and then getting true data on the severity of those cases as well," he said. "If you don’t take into account the hospitals and resources in the hospitals and deaths as well you’re not really getting the full context of the impact of the pandemic. Here in Texas you’re seeing a sharp increase in the number of cases and deaths have not increased that much.“
Ginn says there is certainly a wish list for how to handle the perfect path out of the coronavirus crisis, but that is likely not going to happen.
”We would rather have zero cases but that isn’t the situation and we would like to have some herd immunity, but there seems to be a fear of doing that,” he said. “We would like to think also about the livelihood of all Americans and we are now thinking like the only way is to shut down. "
By doing that you are destroying the livelihoods of millions of Americans, and their businesses are closing across America as people are losing their jobs and that create stress or other dire types of situations and we have increased suicide rates across the country. I think we have to understand that there is going to be some risks but we can’t stay shut down any longer.”
There is a level of uncertainty business owners face on a day-to-day basis these days and and a big part of that uncertainty is about whether employees are being infected.
"On top of there is the uncertainty of government and whether or not they are going to continue phasing out the shut down or roll things back like has been happening in Texas as Gov. Greg Abbott expanded to 75% capacity at restaurants and then when coronavirus cases started increasing, he rolled back to 50%. That puts a lot of uncertainty on the business owner. How can he or she can cover payroll for the people they are hiring just to reopen when things keep rolling back or shut down?”
Ginn says closing down or limiting the reopening of the economy is creating more of the financial aid packages or stimulus programs that are causing furloughs and putting companies in a “freeze mode” where they are unable to hire workers.
”What we are finding out pretty quickly is that we can’t have the economy shut down very long or we will have worst case scenario‘s and that is unfortunately what we are seeing right now,” he said. “We have to have caution but we need to get the economy up and running so businesses can start thriving again, people can get back to work and we can get away from these financial aid packages that are not creating any type of stimulus but only driving up debt.”