We have the resources to get through this crisis, only stupidity is holding us back

Once again, Congress is battling over a new round of “stimulus” for the virus-ravaged economy. Once again, the task is being complicated by a virulent strain of American stupidity for which there seems to be no vaccine.

The target date for this new package was always the end of July, but the Republican Senate and White House took until July 27 to come out with an admittedly incomplete $1 trillion proposal to take to a negotiation with Democrats in the House of Representatives.

The Democrats acted much earlier. In May they passed a proposal to spend $3.4 trillion to keep struggling families afloat with enhanced unemployment insurance and bonus checks, and to help front-line states and local governments, schools and hospitals begin to build a greener, fairer economy as the cataclysm subsides. So where do we stand with these competing proposals?

Democrats recognize, as do many others that the fall-out from this crisis will be long and complicated. They understand as all Americans should that the U.S. has the resources to deal with the crisis if there were the political will. Eighteen million Americans are now unemployed, and the economy is running at only 67 percent of capacity compared to 89 percent when President Bill Clinton was in office.

Republicans cannot agree among themselves on how to deal with this huge waste of resources. Senate Majority Leader Mitch McConnell (R-Ky.) even admits that 20 of his senators do not want to do anything, and none of his caucus seems to understand that this is a long-term crisis that requires a competent government. The most they can imagine is short-term relief payments and the hyped-up hope that the economy that existed before the Coronavirus, however imperfect and unequal, will reappear before the election in the form of a V-shaped recovery.

Serious economists know that $1 trillion is not enough. Most doubt a V-shaped recovery will miraculously appear. Restaurants, offices, schools, airlines, public transport, factories, retail establishments, entertainment venues and their millions of employees will continue to stagger at best, and millions will continue working from home. $1 trillion is a band aid that would do nothing to mobilize the potential of 18 million unemployed and 140 million other working Americans. It will leave 20-25 percent of U.S. potential off-line and idle. The Republicans opted for $1 trillion on July 27 only because it is a round number while hoping voters will be fooled into taking it and them seriously.

The Chair of the Federal Reserve, Jerome Powell, himself a Republican, has tried to educate but to no avail. He has said repeatedly that ultra-low interest rates engineered by the Fed cannot do the job unless government steps in as a spender and investor to take advantage of the river of cheap money that the Fed is making available. The Republican Caucus, however, cannot be moved.

Everything in our history tells us that this is sheer stupidity. New England leaders in the 1650s, lacking gold and silver, wisely authorized rudimentary banks to create the money and credit so that entrepreneurs could pay woodsmen in Maine and New Hampshire to cut tall white pine masts that were in demand at home and overseas by shipbuilders. Alexander Hamilton created the Bank of the United States and other banks in the 1790s to create the credit and money needed to build a water system for New York City, canals, lighthouses, turnpikes and factories that in turn created markets for myriad private American industries and employments.

President Franklin Roosevelt and the New Deal did much the same. They used money and credit from Reconstruction Finance Corporation (RFC) and other special financing agencies to build capacity that the wartime government needed to make the U.S.A. the “arsenal of democracy.” How proud we were.

America has always had the people and the physical resources, as it does now. As in the past, government has to use the credit and money that is available to put American labor and resources to work. That is what American economic history tells us.

My suspicion is that McConnell and his anti-government ideologues do not want to admit that only the federal government can put these resources to work because the virus has paralyzed the private sector. They recoil at the idea that government spending can relaunch the economy while the CEOs of their mythology cannot.

Congress has to allow the government to use the free money Powell and the Fed are offering and the $3.4 trillion Democrats want to spend is desperately needed by millions of Americans at this juncture. It is money that can be spent without burdening future generations or raising taxes on working people who will be the beneficiaries of the spending. All that is holding us back is stupidity.

Paul A. London, Ph.D., was a senior policy adviser and deputy undersecretary of Commerce for Economics and Statistics in the 1990s, a deputy assistant administrator at the Federal Energy Administration and Energy Department, and a visiting fellow at the American Enterprise Institute. A legislative assistant to Sen. Walter Mondale (D-Minn.) in the 1970s, he was a foreign service officer in Paris and Vietnam and is the author of two books, including “The Competition Solution — the Bipartisan Secret Behind American Prosperity” (2005).