5 Myths About the Largest Natural Disaster Relief Effort in History
Do not accept much of what you hear and read regarding the government’s $6 trillion financial response to combat the coronavirus. Some of the myths (or nonsense) floating about need to be challenged. Here are my top 5:
Myth 1: “The federal government is injecting $6 trillion of monetary and fiscal stimulus.”
Reality: This is not a $6 trillion “stimulus” plan, it is a $6 trillion natural disaster rescue plan. And it is probably not enough.
Myth2: “We cannot afford $6 trillion more in spending.”
Reality: According to Understanding National Wealth, the U.S. has total consolidated private and public sector assets of $150 trillion and net wealth of a little under $100 trillion (assets minus liabilities). Thanks to 250-years of freedom and the best designed political economy in history, we are very fortunate and financially the best positioned of any country. The $6 trillion natural disaster relief plan will be financed primarily through unlocking a small portion of national private sector capital (savings) and transferring it to the public sector for the largest relief effort in history.
If ever there were a time to aggressively draw on our storehouse of national capital, it is now. The alternative may be a second Great Depression. This is not an overstatement.
Myth 3: “We cannot afford to add any more federal debt. We’re close to bankruptcy already!”
Reality: Our federal debt is currently about 15% of the nation’s total private and public sector asset base. And, U.S. individuals or institutions own 70% of this debt; therefore, this portion of the debt is offset by a corresponding asset. In the short-term, we can comfortably afford it.
Myth 4: “We should keep the country mostly shut down until the coronavirus is completely gone.”
Reality: Not exactly. We are fighting a two-front war. A decade ago, Columbia University’s Mailman School of Public Health found that poverty was the underlying cause of 172,000 U.S. deaths, or 4.5% of total deaths. “Social causes can be linked to death as readily as can pathological and behavioral causes,” states Dr. Galea, the leader of the research team and Gelman Professor of Epidemiology.
Although to slow the spread of the virus, public officials had little choice but to shut down major portions of the economy for an undefined period. This comes at a high cost, not only in the obvious monetary sense, but in lives. Job losses are in the millions thus the poverty rate will skyrocket. Each day the damage gets worse and more irreparable. There is a solid argument that the loss of life due to shuttering the economy for weeks, possibly months, will be a significant multiple of COVID-19 deaths.
Myth 5: “In a few months, we’ll be through this and we can all finally get back to work. Life will return to normal.”
Reality: For millions of people, life will not return to normal for many years, especially for those on the lower end of the private sector service economy. One cannot turn off the economy, then simply turn it back on. As important as it is, this $6 trillion governmental monetary and fiscal “stimulus” is only a temporary measure to give business a fighting short-term chance to stay afloat and retain its workforce. If they are not allowed to restart operations, and soon, many will cease to exist, rendering most of these measures impotent.
Crisis is an overused word, but this is the real deal. We have been through a revolutionary war, civil war, World War I, Great Depression, World War II, OPEC I and II, 9/11, Great Recession and now this. We will get through it, of course. We just don’t know what it will look like on the other side.
Often it takes a breakdown to achieve a breakthrough. Though many people will be in pain, possibly for a long time, there will also be silver linings. We need to spot them and nurture them. Someday we may look back and have the feeling that this happened for a reason. We should be grateful for the positive financial state of our country going into this crisis and remain hopeful.
Richard Smith, an economic analyst and author of Understanding National Wealth: The Triumph of the Most Successful Political Economy in History, has a range of business experience from private development stage start-ups to $300-million public companies. Smith is the managing director of an advisory firm specializing in analyzing economic and financial conditions and their impact on financial projections and operations. To learn more, visit go.richoutlook.com and connect with him on Twitter and LinkedIn.