Many of you will have heard how the government is considering giving every adult $1500 and every child $500 to stimulate the economy. This is a bold proposal. For a start, it is likely to cost somewhere between $12 billion and $15 billion, so it is not an insignificant sum. Conservatives like me are dead against the idea, of course. This is not free money; it has to be paid for somewhere along the line, either by future taxpayers or by blowing out government debt, which will be funded by… future taxpayers. In other words, enjoy your spending spree now because you will be paying for it seven times over in the future, and no… I do not approve of the idea.
What about just giving it to those in need? A free gift of $1500 to each beneficiary would be nice. They won’t put the money into the bank to spend on a future overseas holiday or invest it in the share market. They will spend it at the grocery store, the bottle store, The Warehouse… and will therefore be assisting the Chinese economy as much as they will be assisting our own.
But just giving it to beneficiaries will mean that lots of people on low incomes will miss out, and that is not a fair distribution of free money either. Many people are hanging onto their jobs by their fingernails right now. Why should they miss out? So we want to give the money to everyone with an income of less than — say — $60,000. But then comes the administrative nightmare of trying to identify all those individuals with an income of $60,000 or less, and they may be living in households with much larger incomes overall. This is not as simple as it may sound.
Governments cannot introduce such schemes quickly and fairly, It is an administrative quagmire. Just think of the wage subsidy scheme. You would qualify if you think your business will suffer a 30% downturn between January 1 and June 30, 2020, but the scheme was made available at the end of March. You could take an educated guess, but seriously — how could you possibly know? So gazillions of businesses applied for the subsidy, uncertain of whether or not their turnover would actually be affected. And now the government is auditing the applications and trying to prove that some of those declarations were false. How can a declaration based on a forecast be false? Nobody knew what would happen next, and it is still only the end of April. We could still be in lockdown at the end of June for all we know.
So no. I don’t believe in middle class welfare, but I think the bureaucracy in trying to administer a case like this might outweigh the cost of the scheme. So we are back to giving the money to everyone.
I have chatted with a few friends about this — over Zoom, of course — and many of them say they will just give the money away to those who are more likely to need it. That is a fine and noble gesture, but it is missing the point of the exercise, and that is what we need to consider now.
The object of the exercise is not to help the poor. There are systems in place to do that, and although a lot of people are left behind, particularly at times like this, the idea of helicopter money is to stimulate the economy. Sure, those who need the money most will spend it all, but they will not necessarily spend it in places where jobs will be saved. Let’s face it. The supermarkets don’t need any more help. Yes, they provide us with essentials, but they have also been operating a monopoly for the last month, and that is not healthy from an economic perspective.
So if this proposal goes ahead, and you are in a position where you need the help, then use it to buy food by all means, but please consider shopping at some of the local food stores, such as butchers, bakers and greengrocers that have not been allowed to trade during the lockdown. They will need your help to survive.
As for me, if this goes ahead, I am going to spend mine only in businesses that could not trade during Levels 3 or 4. So the local restaurants, cafes and hairdressers will get the benefit of my share of this crazy scheme. And if everyone does that, then we may be able to save our favourite local businesses from ruin, because being forced to close for almost 2 months will have been devastating for businesses like them, and many will simply not survive.
No I don’t agree with it. My plan was to support local cafes and restaurants anyway once we are out of lockdown. But if the government decides to go ahead with this plan, we should all act in good faith and use the money to stimulate the economy. It is our civic duty.
Now, does anyone have the number of Glengarry Wines anywhere?
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