Last week, a record 10 million people filed for unemployment in the US. This number will only grow in the coming weeks. To add insult to injury, given this trend, Covid-19 will have 10 times as many financial casualties as the projected worst-case-scenario medical casualties.
I used to work as a trader on Wall Street many years ago. Now I am a small business owner who owns a film production company. I am fortunate because I have done well enough where I will make it through this crisis relatively better than most. Many of the people I work with, including many of my clients, will not.
With businesses having to shutter up and people required to stay home to prevent the disease from spreading, employers are finding it hard to make payroll and are either laying off or furloughing their employees. Freelancers and gig economy workers have been hit even harder because, unlike laid-off workers, they can’t take advantage of unemployment benefits. This is, obviously, causing stress and anxiety among individuals and business owners alike. It is a “money or your life” situation where you could lose both. Fear and desperation are not good in a pandemic. A healthy society and economy must have wage-earners with some kind of income security.
One way to address this problem would be to nationalize payroll until the crisis passes. Under such a program, everyone would continue to get their take-home pay, only instead of their employer making the payments, the government would. This way people could maintain their lives without additional financial stress and employers would not have to worry about making payroll while their businesses are shut.
Self-employed individuals, freelancers and gig economy workers would get weekly payments based on their average annual income for the past three years. Those individuals who were already unemployed at the time the crisis hit would get their unemployment benefits extended indefinitely. People who retired last year and rely on distributions from their retirement portfolios should get their social security benefits increased so they don’t have to deplete their retirement accounts while the market is down and even the most prudently invested and diversified portfolios are suffering.
This would alleviate a lot of pressure all around — which would be good for people, society and, in the long run, the economy. With everything effectively shuttered, people might even be able to save some money. Landlords and property owners would not need bailouts or assistance with unpaid mortgages or rents. Small business owners like myself, if we chose to take advantage of the new loans, could actually use the money to rebuild or grow our businesses, instead of trying to just survive the crisis.
Essential economic engines would keep running. As odiously evil as they are, even student loan payments need not be stopped, so usurious debtors can continue to make money. Denmark, Sweden, the Czech Republic, South Korea and Belgium, among several others, all have similar programs. Even the UK is paying 80 per cent of people’s wages if they’ve been furloughed, with Boris Johnson saying, “We’re going to have to look after people, and help them for a considerable period. The principle guiding us is that nobody should be penalized for doing the right thing.”
The transition would be relatively easy and potentially immediate. Employees would continue to get their paychecks as usual. Only instead of the employers, payroll accounts would be replenished by the federal government.
Instead, Americans are being forced to settle for the promise of a one-time maximum pay-off of up to $1200, which will neither help nor find its way to many people.
The combined total personal income in the US for 2019 was about $18 trillion or $1.5 trillion per month. This is the sum total of all declared income from everyone, whether employed, self-employed, freelance, full-time, part-time or anything in between. $18 trillion is eighteen thousand billion. For perspective, if you had $1 billion sitting in a drawer— just sitting, and not invested or growing— you could take out $100,000 every day for more than 27 years before that drawer was empty. Go ahead, do the math on your phone. Now imagine 18,000 such drawers. That’s how much money Americans took home last year.
The recent Coronavirus Aid, Relief, and Economic Security — or CARES — Act, recently signed into law is a one-time $2.2 trillion stimulus package. The bill was haphazardly put together and complex disbursement logistics are far from figured out. According to the bill, $560 billion has been earmarked for individuals. But consider this: if the government just handed over $1200 to every man, woman, and child in America, it would cost taxpayers less than $400 billion dollars.
The actual amount that will be handed out is a fraction of that. There are convoluted processes that determine who gets what, or how money is disbursed. While many individuals can get a one-time payment of up to $1200 for each adult and $500 for each child based on their 2019 tax filing, many more are summarily excluded. Anyone who is divorced and sharing custody but not the taxpaying parent is excluded from the child payment. Recently divorced parents have to wait for their $500 until next year, when they file their taxes for 2020. The same is true for anyone who had a baby this year.
Parents with children over 16 and away at college are excluded. Disabled dependents — for example, children over 16 with autism or any other mental or physical disability — are excluded. Senior citizens who are claimed as dependents by their adult children are excluded. Gig economy workers and freelancers — like videographers, sound recordists, plumbers — are effectively excluded. Anyone who made over $75,000 last year— which barely enables a modest life in New York — is excluded. Supposedly there are loans available to some of them and small business owners like myself. The process for applying varies from state to state. The eligibility requirements are confusing and the websites don’t work. For those who qualify, it still means emerging from the crisis saddled with additional debt payments, with a business that will have to be rebuilt in a depressed economy and many millions unemployed.
Stress and depression is mounting while social distancing is making people more and more isolated, which in turn exacerbates that stress and depression — and there is no realistic end in sight. Regardless of where one stands on the political spectrum, in the long run, this bipartisan CARES Act is a carelessly drafted piece of no-strings-attached, reverse Robin Hood legislation that will be great for big corporations at the expense of individual taxpayers and small business owners.
Americans have a preternatural aversion to socialism. Except we have the most liberal socialism imaginable. It’s just not for the average citizen. It is for multi-billion dollar, faceless corporations.
Sameer Butt is a former Wall Street trader and Daily Show correspondent who now owns a film company. Follow him on Twitter and Instagram @SameerNYC