Shortly before breaking for the Fourth of July recess, Senate Majority Leader Mitch McConnell (R-Ky.) told reporters that finalizing the next coronavirus aid package would be a focal point for congressional leadership once they return to session.
Legislators and analysts have kicked around many ideas for this next bill designed to put more money in American workers’ and businesses’ pockets, including a payroll tax holiday and back-to-work bonuses. To sufficiently combat this new threat to employment and business growth, however, Congress needs to extend its deliberations beyond the singular focus of providing consumers and businesses with more funds. It must also recognize the importance of implementing policies that ensure these funds flow throughout the economy.
When I served as the U.S. treasurer, the Reagan Administration passed a historic tax cut bill, phased into effect over several years, to combat the early 1981-1982 recession. Although the tax relief increased economic growth significantly by the mid-1980s, lingering uncertainty over market conditions dampened the short-term gains. U.S. companies ramped up production significantly in anticipation of a boost in consumer spending, but the level of demand they expected didn’t come to fruition. By the second half of 1982, they had to slash overall output and tens of thousands of jobs as a result.
The lesson here is that even in cases where the federal government fosters a pro-growth environment to overcome downturns, public sentiment still takes time to rebound. The current health crisis, mired in public wariness, likely will cause an even more significant delay in consumer marketplace participation. That’s a problem when thousands of businesses have already shut their doors permanently because of COVID-19. Plenty more will do the same if consumer confidence doesn’t rebound soon.
Thankfully, in recent letters, more than 70 U.S. senators and 240 House representatives have already come to terms with a free-market solution to help boost consumer confidence during this recession without adding any new spending. This bipartisan coalition wants cabinet secretaries to put their already-funded advertising campaigns into immediate action to inform, comfort, and reassure Americans.
Government agencies currently are sitting on federal dollars earmarked for the sole purpose of advertising. If there has ever been a proper time to use these funds, it’s today.
The free flow of information is what increases consumer confidence, optimism, and consumption. Notifying the American people about the latest health news and data about how to venture out of the house again without harm will raise public sentiment, thereby giving business demand the shot in the arm it so desperately needs. Congress has made its desire for these ad campaigns to quickly take effect abundantly clear in its letters to the administration, but within the next relief package, it should also formally direct agencies to begin them now.
While targeted relief to the hardest-hit industries is important, lifting the whole economy should remain the principal goal. All sectors advertise, and since the entire country would benefit from policies that promote this advertising, this idea should merit serious consideration.
Whatever Congress does, it needs to ensure that its coronavirus tax and bill-reducing initiatives are paired with ones that drive confidence, increase economic activity, and accelerate businesses’ ability to stand on their own in a free-market system. History has proven that it’s the most effective way to secure a timely bounce back of the U.S. economy.