BankThink

The $2T stimulus isn't a ‘bailout.’ It’s a ventilator.

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The nation has reached a historical moment in facing the first crisis where U.S. federal and local government entities have gone so far as to order people to stay at home and limit business operations and travel.

Time will tell whether the actions of government will result in the health outcomes hoped for. Certainly, the actions are well meaning and have a positive effect from a health and safety perspective. But the measures have profoundly affected jobs and businesses — from Maine to Florida, California to New York, and everywhere in between.

As the Federal Reserve and other governmental agencies do their best to relieve the economic stress these “stay in place” orders have caused, some critics have compared today’s congressional actions to the 2008 crisis in saying, “Here we go again, another bailout.”

Respectfully, this is the wrong analogy and leads to mistaken policy conclusions.

Government isn’t “bailing out” the businesses and individuals due to circumstances of their own making. The $2 trillion coronavirus stimulus package — and more to come — is compensation to those enduring necessary hardship as government acts to protect the many.

Think of it this way: If someone were to take a substantial sum of money from you but subsequently offer a portion of that money back, you would never deem it a bailout. And yet that’s how some have labeled the package.

To be clear, this isn’t an entirely novel situation. Government takings for the public good have happened before and will happen again. In those cases, as is appropriate here, government compensates the property owner.

Cases abound in U.S. history: railroad rights of way, building of highways, bridges, etc. Fairness and equity have typically dictated that government compensates those who suffer economically for the greater good.

Indeed, Supreme Court decisions, eminent domain and common law concepts legally support such government compensation. The nation’s founders explicitly considered this sort of circumstance when drafting the Constitution.

They realized that, in some circumstances, public authorities would need to compel private property owners to relinquish property to which they held title. Public authorities were given the ability to take that property if the government deemed the “taking” to further the common good, so they fashioned what is now known among constitutional scholars as the Takings Clause.

But whether this is a case strictly covered by rules of eminent domain or the Takings Clause, is not the core issue.

What’s clear is that equity and fairness in the country, where a rule of law exists, dictates just compensation in response to this coronavirus crisis. Businesses and citizens who have been harmed are not being bailed out. They are economic victims whom government is obligated to assist.

And if the outcome of this bill and the next do not provide sufficient compensation — and the economy continues to fall — the government will need to take further steps, as it is considering already. These stopgap measures are necessary policy steps meant to compensate those who’ve had opportunity and prosperity suddenly taken away.

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