ARTICLE
29 October 2020

When Does Pandemic Financial Relief Become Excessive?

FC
FTI Consulting

Contributor

FTI Consulting
As Congress and the White House debate over the next round of pandemic financial relief, it's an opportune moment to ask an uncomfortable question...
United States Coronavirus (COVID-19)
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As Congress and the White House debate over the next round of pandemic financial relief, it's an opportune moment to ask an uncomfortable question: Is it possible for such relief measures to be excessive, misdirected or wasteful?

Many politicians and economists believe not. Put them in the "whatever it takes" camp. Fed Chair Powell is among those who believe another round of stimulus is essential to sustain a stalling recovery and cannot be overdone.

Powell recently stated, "Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses... By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste."1 Many in Washington share this sentiment.

Apparently, no amount of financial relief is too great, and there is no such thing as an unproductive use of taxpayer money in these circumstances. But surely there is some amount of stimulus spending beyond which such sentiment cannot be validated. We touched on this topic a couple of months ago, but it's worth a deeper discussion, given the current showdown in Washington over the next stimulus bill.

The CARES Act was passed quickly by Congress in late March as the prospects of stay-at-home orders and business shutdowns across large parts of the U.S. economy were looming large. The act authorized more than $2 trillion of federally financed relief, much of it in the form of direct payments to individuals and businesses, which was more than twice the size of the stimulus package passed during the Great Recession of 2008-09.

Originally published by FTI Consulting, October 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
29 October 2020

When Does Pandemic Financial Relief Become Excessive?

United States Coronavirus (COVID-19)

Contributor

FTI Consulting
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