Bitch (The Government) Better Have My Money (Stimulus Check)
Bitch (The Government) Better Have My Money (Stimulus Check)
Today's newsletter has the same energy as "Renegades" except instead of Obama and Springsteen, it's me and my dad talking about the economy
I know we all find our own ways to disappoint our fathers in our own time. I just decided to turn my experience into an entertaining newsletter for all of you.
With news that the third coronavirus stimulus package passed in the House and is moving to the Senate for a vote, I wanted to know what was in this bill that made it different from the last two economic relief packages, what effects it may have on the economy, and what the current state of our economy is nearly one year into the pandemic. Of course, whenever I say the word economy three times, I summon my father through the Beetlejuice Transitive Property.
After a fair amount of curmudgeoning about how I’ve never taken an economics course and how it’s really not that hard (coming without an ounce of sarcasm from the man with a Bachelors, Masters, and an almost Ph.D. in economics), I asked Bill Sharp, an economist and the founder of Sharp Economics, to try to explain math to me without making me cry at our kitchen counter.
The Everlane of Economics (aka the basics)
In order to understand how the new stimulus bill is going to impact the economy, I thought it would be smart to first actually understand the economy. I asked Bill to speak as simply as possible and he broke it down like this:
“The economy tends to grow over time in the aggregate. When the economy is growing, jobs are being created, on net. Jobs are always being created and lost but during an economic expansion, the number of jobs being created outnumbers those being lost. More people are making money and generating more income.
In a purely good time, you want the economy to grow 3%, on a real basis. That means the number of goods and services on a real basis is 3% higher than it was a year ago. Unemployment declines by a rate of 0.5% per year. Inflation is running around 2%. That’s the optimal outcome of the situation.
During a recession, the growth rate is negative. This means the economy is contracting or shrinking. More people are losing their jobs than jobs are being created, on net. Unemployment rates go up, income goes down. This means aggregate spending goes down.”
Quick sidebar:
When an economist is talking about “real” something, it’s not a loose term like it would be if there was such a thing as the Real Housewives of Economic Theory. Real defines a tangibly measured thing, such as real GDP (gross domestic product). As Bill explained it, “Nominal GDP is the price of cars rising. Real GDP is the number of cars being sold per year.”
At this point in the conversation, I asked what I thought was a very astute clarifying question: are we talking about money?
The answer, friends, may surprise you: “The economy is not about money. Economics is a way of thinking, it’s a thought process. You use money to measure things to keep track of them, like a scoreboard in a sports game. You’re measuring real goods and services. The number of cars, the number of iPads, the number of people working in a restaurant, the number of jobs in the publishing industry. You measure them by putting a dollar amount on them.
Economics is about people.”
Now that I know economics is less like my AP Calc class (during which I cried every single day) and more like one of those ensemble movies (think: Valentine’s Day and New Year’s Eve), it got a whole lot more interesting!
But there was one more theoretical hurdle Bill set out that I had to overcome (and this one was, unfortunately, less reminiscent of He’s Just Not That Into You):
Bill: Do you remember what a sine wave is?
Emily: No…?
Bill: It’s a wave graph and at the bottom is what’s called a trough. You draw a line that goes up to the right until it reaches a peak. The line is expansion. Then you have it turn down from the peak, then the line goes down to another trough. That line is recession.
Emily: Is the economy ever chilling? Not moving from trough to peak but just kind of steady?
Bill: The economy is about life. It’s a reflection of people’s behavior. Is your life ever stagnant?
Emily: No.
Bill: No.
Emily: So we’re not talking about money, we’re talking about the meaning of life.
Bill: You, my unfortunate daughter, have decided to ignore my suggestions to understand economics and now you have no idea what the meaning of life is.
Uncovering the true meaning of life and understanding calculus? All in a day’s work here at Emily For President.
Economics in the time of corona
Before we get into the in’s and out’s of the new stimulus package, we first have to look at why it’s necessary in the first place. President Biden has stated that his bill is intended to speed up the recovery of the economy from the ongoing recession. So I started there.
Emily: From your point of view, are we in a recession?
Bill: No, we’re in an expansion.
“It takes time to determine what phase of the business cycle we’re in. There’s a group that makes that assessment but they take around 6-12 months. This [the pandemic] was unprecedented. It hit the economy very quickly and intensely, and we could tell right away we were in a recession.
A lot of times the change in the cycle occurring and you don’t know it for a few months, which means people like me have valuable opinions. I’ll tell people we’re in a recession or expansion before it’s officially determined.
Do you remember when we went to Disney and it was a Thursday morning and I had to do some work? We were in a recession then, April 2009, and at that time, a report comes out on the economy and I said, ‘this is the turning point. We’re moving into an expansion.’
October 2007, a similar thing happened: I said the economy was about to turn and we were about to go into a recession. For two months, I got beat up by people saying I didn’t know what I was talking about. There have been instances that I can recall when this happened.”
I, of course, only had one question in response to that:
Emily: Would you consider your job to be like a fortune-teller’s?
Bill: Funny you said that because I liken my job to be a glorified evangelist. When we moved to New York City and would walk home from dinner, we would walk past a fortune teller and she would say, ‘$10 and I’ll tell you your future,’ and I said back, “$5 and I’ll tell you yours.’ Mom used to hate when I did that.
You try to listen to people who have a good track record.
Emily: Do you have one?
Bill: I think so.
I couldn’t help but wonder... “What would a Samantha bill look like?”
While my father may believe that we are in a period of expansion, there are still a number of troubling economic developments as a result of the global pandemic. The American Rescue Plan Act of 2021 seeks to address these issues by proposing money for “vaccination programs, expanded unemployment insurance, $1,400 stimulus checks, state and local governments, school re-openings and more.”1 It builds on the two previous coronavirus stimulus packages: the CARES Act which was passed at the start of the pandemic last March, and the Consolidated Appropriations Act, 2021 spending bill.
Now, if that paragraph seemed a little crowded, we’re going to break down the core measures in each act. (And if it didn’t, congrats on being able to compartmentalize your thinking, I guess?)
The easiest way to understand the differences between these three bills and what the newest one seeks to do is in terms of the three cast members returning for the Sex and the City reboot:
The CARES Act is Carrie as she got the most attention but also turned out to fall short in many ways, despite fans of hers defending her whenever anyone was critical (p.s. you’re not a Carrie. Your friends are lying to you).
The CARES Act included the $1,200 stimulus checks but focused more on helping businesses heavily affected by the sudden economic shutdown in early March 2020. It created the Paycheck Protection Program (already scandalous in its similarity to the original PPP, in my opinion), which was designed to offer loans for small businesses. The provision became controversial as it was revealed that more than half of the money designated to program in the act went to 5% of the recipients and about 600 mostly larger companies, including national chains like Shake Shack, received the maximum relief funding of $10 million. Definite Carrie energy.
The Consolidated Appropriations Act is like Charlotte. She had a lot of money, a lot of different storylines, but very little consideration for those around her. Her character arc was always about what she was going through and focusing on herself. Most of the funding in this bill appears to be internal, with $900 billion for stimulus relief and $1.4 trillion (with a T) in a spending bill for the federal government. That’s great for Charlotte and for the government, but not for American citizens who received smaller personal stimulus checks.
And then finally, the American Rescue Plan Act is Miranda, and we should all be Mirandas. Compared to the previous two, this bill in its current form is more focused on individual Americans, and with good reason.
When I asked Bill if prioritizing citizens over businesses was smarter for the economy at this time, he said “while a lot of the answer is political, there are 10 million more people without jobs today than there were in February 2020 prior to the pandemic. A lot of those people are out of work not for something they’ve done but because of government restrictions. So in my view, they should receive some compensation for their job loss from the government.”
What are the next steps for passing the American Rescue Plan Act?
The more I write out that name, the more it sounds like a Borat-affiliated piece of legislation.
The House passed the bill by a vote of 219–212 on Saturday, sending it over to the Senate for approval. Congress has a parliamentary procedure called Reconciliation which, in the Senate, allows for the passage of a bill with a majority of votes. With the Senate split 50-50, this means the deciding vote will be cast by the president of the Senate or, as some people call her, the vice president.
While the bill itself will be able to be voted on through the process of budget reconciliation, one popular component of the bill —raising the federal minimum wage to $15 per hour— could not be considered as part of the bill and was therefore removed. Although the bill has gotten push back from elected GOP officials in the Senate, the future for this relief bill is hopeful.
And so too, apparently, is my oft stoic father. While the inflation rate is expected to rise above 3%, Bill wanted to emphasize that inflation is not a bad word. “There’s a math thing that I won’t get into for you, but the inflation rate is going to go above 2% for short time. My hope is that it comes back down to under 2% and we continue to see strong job growth. And we’re expected to recover the 10 million lost jobs during the pandemic by the end of 2021.”
Finally, I asked my father the most important question: “Why should I have taken an economics course in college even though you know I still can’t do simple math?”
“Most of this stuff is easily explained through mathematical equations, but entry-level classes are all like this discussion we just had.”
Thank you to my dad for explaining economics until it made sense to me. He would like it known that maybe “Dad’s not such a dumbass after all.”
“What’s in the House’s $1.9 trillion coronavirus plan,” Rachel Siegel, February 27, 2021, Washington Post.