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How to Spend the Stimulus Windfall

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Opinion

Editorial

 

As the fight against the COVID-19 pandemic winds down, another battle — yes, we can call it that — is emerging on just how the state should spend more than $5 billion in federal stimulus money coming it’s way.

Actually, there are different fronts to this conflict, the first being a large disagreement over who should control this windfall, with both Gov. Charlie Baker and the Legislature believing that they know, better than the other, how this money should be allocated.

We’re not sure either is fully qualified, but that’s another matter.

Let’s get back to the money — $5.3 billion of it, to be exact. This is the state’s share of the proceeds from the American Rescue Plan (ARP). It is, indeed, a windfall, a rare opportunity to take money with no real strings attached to it and put it to some good.

So, naturally, there has to be disagreement over who should control the money and how it should be spent — should we really expect anything else? We hope these differences of opinion can be worked out quickly (probably not, but we can hope), and that the state can commence allocating this money in ways that will create opportunity and address long-standing problems. It appears likely that the proceeds will be divided in some way, with the governor controlling a large portion and the Legislature deciding how to spend what’s left.

Already, the governor has indicated several priorities, including everything from the housing crisis to battling opioid addiction; from infrastructure work to funding the state’s announced vaccine lottery sweepstakes.

While these are worthy causes, to be sure (although we certainly believe there are better ways to spend $6.5 million than a lottery), money needs to be set aside to help the businesses of this state, many of which are still battling to fully recover from the pandemic. While many business sectors are starting to rebound, especially the hospitality industry after a brutal 15 months of stagnancy and then several levels of reopening, many individual businesses are struggling to get all the way back.

One big obstacle is workforce. Companies across all sectors are struggling to find good help, and an infusion of funds into training programs would certainly help address the ongoing labor shortages. As economic-development leaders have said for years, the problem isn’t necessarily with the numbers of people in the workforce, but the skills they possess.

Meanwhile, we share the business community’s disappointment that the governor remains opposed to allocating some of the money from the American Rescue Plan to pay for the huge deficit in the state’s unemployment insurance fund caused by the deep and very sudden job losses during the pandemic; more than 30 states have already committed to using some ARP funds for this purpose.

Baker has instead signed legislation that spreads the hike in the so-called solvency assessment over 20 years and covers $7 billion in unemployment payments tied to pandemic-related job losses.

We don’t believe that simply spreading the payments over 20 years is a real solution to this problem. The pain remains — it’s just dispersed over two decades instead of all at once. While the payments will be smaller, they will still be a burden to businesses that are, as we noted, still struggling to fully recover from the pandemic and don’t need to pay for a problem that was not of their doing.

When it comes to the ARP windfall, the phrase ‘good problem to have’ certainly comes to mind. Indeed, deciding how to allocate $5.3 billion is a test for which there are few truly wrong answers.

But it is incumbent on the governor and the Legislature to come up with the best answers, and some of these involve a business community that is far from out of the woods when it comes to this pandemic and the many challenges that remain.

When Stimulus Backfires

By
Opinion

Editorial

 

Let’s start by saying there is no debating that most of the economic-stimulus programs created by local, state, and federal governments have been extremely effective in helping businesses of all sizes and moving the economy forward at a time of extreme — as in extreme — duress.

Indeed, programs like the Paycheck Protection Plan initiative have provided an absolutely vital lifeline, without which many small businesses in this region and across the country would simply not be here. Other programs have benefited healthcare providers, specific sectors of the economy, and municipalities.

That said, some stimulus has actually backfired on business and the economy, and that’s especially true when it comes to federal unemployment benefits — checks that were designed to help those who lost their jobs to the pandemic, but have had serious unintended consequences in the form of people who are simply staying out of the job market because they can make more money by not working and are making the no-brainer decision to do so.

This is not a news flash; it has been going on for roughly a year now. What is a news flash — sort of — is the extent to which these unemployment benefits are stifling the economy just as the ingredients are there for it to start really taking off again.

Indeed, as the story on page 6 relates in great detail, businesses across a number of sectors are struggling mightily to find the help they need. And for some, the inability to find this help could threaten their ability to expand and take on work that could come their way.

Stories abound about pool-installation companies already booked solid for this season and simply unable to take on any more projects, even though they are there for the taking; home-improvement companies having to turn down lucrative projects because they just don’t have the workers; and restaurant owners looking ahead to better times with a mix of anticipation and dread, with the latter involving great uncertainty about whether they will have enough bodies to handle the surge in volume they hope — and believe — is coming.

Not all of this is the result of the unemployment payments contained in the federal stimulus package. Indeed, many employers were struggling to find adequate supplies of help before anyone had to think about hanging a mask from the rear-view mirror of their car. But these benefits have made the situation exponentially worse.

And it’s not just the benefits, especially the additional $300 per week contained in the stimulus package, that are causing the problem; it’s the inability, or the unwillingness, of state unemployment divisions to enforce the simple rules that pertain to unemployment benefits.

Unemployment was designed to help those who have lost their job and cannot secure another one. Those who receive these benefits are expected to maintain a vigilant pursuit of new employment opportunities, and accept one when a proper fit is found.

These days, that is simply not happening. People are staying on unemployment because, well … why wouldn’t they? Especially when they could earn as much, if not more, by not working.

Many employers are already counting down the days until September, when these benefits expire, thinking matters might then return to normal. This is wishful thinking — this Congress may well extend the benefits again, given the way things are going — and not where their energies should be placed.

Instead, business leaders should be lobbying those in power — both in Washington and Boston — to do something about this problem now, before things get worse and before the recovery from COVID becomes further stalled.

As we said at the top, most of the federal, state, and local stimulus has done what is was designed to do — help people hurt by COVID weather the storm. The unemployment benefits were designed to do the same, but the unintended consequences have now greatly overshadowed the good that’s been done.

This is a case of stimulus gone awry, and something has to be done.

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