Financial recovery and prevention of disasters must be inclusive
How to bail out American workers in a crisis: Enact payroll and income tax holidays
In this crisis, no American was at fault. But all Americans are at risk.
It's worth taking a moment to understand why this crisis is not like anything we've seen in the past, whether in 2008 or the century prior.
You've often heard the term "GDP," or gross domestic product, as a measurement for how the economy grows. Economists break down GDP into four parts:
Consumption - Purchases by individuals of goods and services;
Investment - Purchases by businesses giving them increased capacity to offer their products;
Government spending - Local, state or federal government purchases of any good or service;
Net exports - The difference between the value of exports going out of the U.S. and the value of imports coming in.
As you probably guessed, consumption, which makes up nearly 70 percent of U.S. GDP, is the problem. With shutdowns taking place across cities and towns nationwide, going out to restaurants, gathering in stadiums, heading to the mall or to the gym are all, for now, out of the economic picture. And, as every payment is somebody else's income, this forced austerity is a big hit to small businesses, who need to pay leases and other debt obligations during this time.
It's a tough situation - but just as consumption is the problem, consumption can also be the solution.
There are two phases to bringing America out of this crisis. The first is the tide-over phase, coming in the form of "fiscal stimulus" from an agreement between Congress and the White House. It's a series of direct government actions to help American workers and businesses make it through this period of forced austerity in one piece. Direct cash handouts to individuals, low-interest loans to industries struggling the most, aid to small businesses to keep employees on payrolls, and support for the health-care industry to help it through peak medical demand make up the four "pillars" of this phase's support.
Eventually, people are going to start going back to work. Whether it will be in two weeks or two months, employment will start to rise again. To get America's economy back on track and start making up for the reduction in consumption during this time, Americans are going to need to spend, and spend effectively. Everyone will need to make up not only for the wages lost during any furloughed or unemployed time, but also to have extra cash on hand to spend beyond obligations and support small businesses nationwide.
The most efficient way to allow working Americans to spend and stimulate the economy is rather simple: a temporary payroll tax and federal income tax holiday for both small businesses and American workers. That would mean no American, regardless of income, would pay federal income taxes for the rest of 2020.
From the White House to opinion contributors, much has been said about the merits of temporarily suspending the payroll tax. For the majority of workers, especially low-income workers, this is their primary tax burden. Small businesses in particular also face a large payroll tax burden on the employer side. Suspending the tax would help American workers and businesses make up for lost earnings during this time as the most direct transfer to workers that policymakers could hope for.
A federal income tax holiday also will aid in the rebound of American consumption during the recovery phase. Similar to the reasoning of the suspension of the payroll tax, the extra cash on hand will enable the American consumer to consume once again and support the small businesses so key to the strength of the American economy.
Yes, it is true that for some high-earners, the tax cuts as described will help increase their savings, but it simultaneously will increase their investments in stocks to help stabilize markets, purchase goods and help rebuild our economy.
It is important for reforms like these to get cash in the hands of Americans as soon as possible. Having a bureaucratic verification process just delays the implementation. The fix is very simple: For the window of the holiday, the benefits apply to all American workers. But some with incomes above a certain threshold, who were more likely to save the payroll tax cut than to spend it, will refund to the federal government in their 2020 tax filings what they would have owed during this period, to ensure that our great American institutions like Social Security remain strong.
This is a time when Americans need help - and the suggestions above are part of a do-it-all, do-it-now approach that the federal government is starting to finalize in its stimulus package. It's true that the government shouldn't be picking winners and losers in the private sector, but some businesses or industries may need more help than others. If bailouts are going to happen, there need to be provisions in place to ensure that, at the end of the day, there's also a bailout of the American workers who were thrust into this situation through no fault of their own. The payroll tax and federal income tax holidays not only ensure just that, but also give Americans the means to stimulate the economy directly at its source.
Corey R. Lewandowski is President Trump's former campaign manager and a senior adviser to the Trump-Pence 2020 campaign. He is a senior adviser to the Great America Committee, Vice President Mike Pence's political action committee. Follow him on Twitter @CLewandowski_.
David N. Bossie is President Trump's former deputy campaign manager and president of Citizens United, a political action committee that promotes limited government and free enterprise policies. Follow him on Twitter @david_bossie.
Together, they are co-authors of "Trump's Enemies" and of "Let Trump Be Trump: The Inside Story of His Rise to the Presidency."