Money needs to get spent fast. Money needs to get spent well.
Right now, stimulus design faces a fundamental trade-off between flexibility and accountability.
On the one hand: We’re facing a historic economic crisis, born of a bungled public health crisis. The pace at which households and businesses are confronting financial ruin might be unprecedented. There is an urgent need to get money to both groups as quickly as possible. The more conditions placed on this financial aid — for instance, who can qualify for emergency loans, or what they must do to have loans eventually forgiven — the longer it will take to vet recipients and get money out the door.
On the other hand: When giving away trillions in taxpayer dollars, there should be some basic safeguards and transparency to make sure funds are not misused. The White House and Senate Republicans have essentially been asking for the administration to be granted a $500 billion slush fund — with almost no meaningful checks on how that money gets distributed or any visibility into who benefits.
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Separate from provisions extended help to households and small businesses, the GOP Senate bill that failed a procedural vote Sunday evening had provisions aimed at big businesses. It would offer $75 billion earmarked for airlines, cargo air carriers and undefined “businesses critical to maintaining national security,” with few preconditions. It would also give Treasury Secretary Steven Mnuchin enormous discretion to decide what other unspecified companies, states and municipalities can get another $425 billion in loans and loan guarantees.
And it said Treasury could delay disclosing for six months who gets these funds.
There are two main reasons to worry about this astounding amount of discretion and secrecy. One has to do with whether we can trust firms (specifically, to do right by their workers). The other has to do with whether we can trust the administration (specifically, to do right by taxpayers).
One lesson we learned from the financial crisis was that bailed-out corporations — unless specifically proscribed from doing so — may abuse taxpayer generosity, by redistributing their rescue funds to shareholders as dividends or to executives as bonuses. Right now, the White House and Senate Republicans are advocating conditions that could allow similar abuses.
The legislation voted on Sunday, for instance, said that any companies Mnuchin finds “eligible” for that $500 billion should maintain the same employment levels that they had as of March 13 “to the extent practicable.” But it doesn’t define what “practicable” means. Which suggests an airline, cruise company or hotel could accept taxpayer funds, send the money to shareholders and still lay off many workers.
Additionally, this is an administration that has abused its power time and again, doling out favors to friends and attempting to weaponize other authorities (antitrust, government procurement, Transportation Security Administration screening) against perceived enemies. It’s reasonable to worry whether Mar-a-Lago members might be unusually big beneficiaries, while blue states get short shrift.
“Cronyism and incompetence are in the DNA of this administration,” says Adam Levitin, a Georgetown University law professor and former special counsel to the Congressional Oversight Panel for the Troubled Asset Relief Program (remember TARP?).
Trump, of course, runs hotels and other businesses likely affected by the crisis; when asked during a news conference Sunday evening if he would commit to not receiving any of the bailout money himself, he replied: “Let’s just see what happens.”
Every administration should be subject to oversight. This one in particular has long lost any benefit of the doubt to be allowed to act without oversight, especially when given a half-trillion dollar check. But we don’t have the luxury of time required to have Congress vet every dollar that gets doled out.
And once again, having Congress craft a laundry list of conditions hurts speed and flexibility.
So what should we do?
We could revive some basic accountability measures from TARP, such as creating a special inspector general for the coronavirus bailout funds. And beneficiaries absolutely should be disclosed upfront, none of this six-month-delay nonsense.
Congress might also consider another model altogether: Allow Mnuchin to spend whatever he likes from that “slush fund,” with few strings attached, for some very limited period of time, such as two weeks — with proper disclosure, obviously. Then at the end of that period, an independent board made up of special Senate-confirmed professionals takes over. It can decide what principles to follow for disbursing most of the remaining funds, which either way will likely take weeks to get moving.
This would allow an initial tranche of assistance to get out quickly, and outsource technical questions about difficult trade-offs to experts. It also might offer political interest to both parties: Given the uncertainty about November’s electoral outcome, having an independent body determine these decisions would provide some political insulation for whoever is president a year from now.
When, hopefully, the worst will be over. But only if Congress acts now.
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