The nonsense of moral hazards created in COVID 19 bailouts of small businesses and unemployed workers
https://www.politico.com/news/2020/07/30/senate-gop-unemployment-extension-388170
https://www.politico.com/news/2020/07/30/senate-gop-unemployment-extension-388170
Some GOP senators approved large bailouts for business and did not complain if it ran up the federal deficit, or even if it created a moral hazard making it easy for a business to cheat and giving them the temptation to do it.. However, when it came to the low wage earners, all of a sudden it became a moral hazard discouraging them from getting a job and it was too bad if these workers could not pay their rent or mortgage or buy food because their jobs had evaporated in the COVID depression. . These GOP senators, standing in the way of enhanced unemployment payments are a moral issue unto themselves. It is a " let them eat cake" attitude that long ago became the symbol of class deafness and ignorance, over which many of the elite lost their heads in the French Revolution. The Heroes act passed by the Democrats in the House includes a bipartisan agreement on the PPP act extension (aid to small business second round and for PPP aid to small business in the first round that has not been spent yet. The Cares act passage is being held up as of 8/5 by refusal of some GOP Senators to support it. Support of small business in the relief package has bipartisan support.
The hardest hit by COVID 19 are restaurants and even some we consider successful are facing tough times. This from The Colorado Sun tells why some well-known ones are on the edge. I am a restaurant fan loyalist and I am selfish. I do not want to see my favorites not make it through COVID 19 because going to them is one of my beloved joys in life. However, every one of my children has at one time or another, and likewise, some of my grandchildren, have worked for restaurants. One made the food industry her career; another almost did. One of the problems is that being a server, a cook, a hotel bar manager has been underpaid and they have moved on to get more education and earn a living wage in another industry. The question is then why should there be a labor shortage and few want to work? It is because welfare...increased unemployment insurance..pays more than they earned eeking out a living in lower-rung food jobs and restaurants have made ends meet with paying their workers so little even tips cannot make up the difference. These low paid workers rarely have employer-provided health insurance and Obamacare has been a godsend. However, the Trump administration is attempting to kill it via a lawsuit that will be heard by the Supreme Court this fall and be ruled upon in the spring. What it may also mean that to pay a living wage after COVID, restaurants my have to raise their prices and pay their workers better. The genie of what is a living wage is out of the bottle and starvation wages will no longer be tolerated. Also, being a food service waiter or cashier or even a busser has the same perils as a grocery store clerk that comes in contact with the public and the self-serving anti maskers who thumb their nose at being responsible for their own health as well as others. There is a risk of catching the virus is a hazard involved in being a server. The other reason is the loss of jobs to even return to since so many restaurants have closed their doors and there is not a job to return to or one within commuting distance. So much of the problem above and beyond other areas in the country is that so many of them depend on tourist business for customers since tourism is Colorado is one of our major industries.
Miller Hudson writing in the Colorado Statesman addressed the unmotivated worker myth: "The notion that indolent workers can be incentivized to return to jobs that no longer exist before we bring COVID-19 under control is absurd. Until then, keeping those who have lost their paychecks housed and out of soup kitchens will prove cheaper than flooding our streets with an avalanche of homelessness and misery. Colorado’s second bout of economic peristalsis is likely to bring on evictions and a run on MEDICAID, as employer-based insurance coverage expires, threatening the rickety structure of a health system approaching collapse. It’s not a propitious time to be serving as governor."
If making it possible for the unemployed to survive COVID with an extra $600 is a moral hazard, the small business loans made to restaurants could also be a moral hazard that could come back to haunt them if they were not honest about the jobs they created. Why that was made a loan instead of a cash grant is a mystery to me if there was no accountability now. If in the future, an audit shows the business lied about maintaining their payroll, rent or utilities comprising 70% of the loan, and they are forced to pay back the loans, there could be another wave of restaurant closures. The interest rates were so low and the loans were over a 2 years period, there may be defaults, not just in the restaurant sector but in many small businesses.. Auditing all of that is going to be crazy so expect many loans will just be written off a loss to taxpayers and a low-cost 2% loan will be a gift to franchises and small businesses. The result is those many of those business owners may get away with not providing jobs which was one of the rationales for the bailout loans. We would just have been better off by making it a smaller grant to small business, a percentage of past income, than going through this brain damage and future bureaucratic gobbledegook that created a moral hazard, a temptation to cheat. Why not just consider all of this an economic stimulus
and a humanitarian necessity that puts money back into the economy during the worst economic times since the great depression. States cannot do it because they have balanced budget requirements and the only entity that can is the federal government.
How does that work if there is no job to go back to even if they wanted..50 million jobs have been lost in the US... My guess after this people realize that it takes $15 per hour to not live in poverty or qualify for food stamps. That may be a bad thing if you are an employer, and consumer prices may have to rise, but I think it did give an impetus to legislation. Lucky for me as a rental complex owner my tenants have paid their rent..these are truly tough times. Landlords will be suffering, too. Another legislative impetus will be to either protect Obamacare and expand it or to adopt some other method of making healthcare affordable It became abundantly clear that insurance tied to employment is not wise.. |
