A trillion dollars used to be a lot of money. In the past, most people never even thought in these terms since it seemed so far from reality. A trillion was like a gazillion. Few knew how many zeros were involved.
However, times have changed. Our economy has expanded, and the value of goods and services has spiraled into the trillions. However, the most significant use of the figure is not growth but debt. We are immersed in a sea of debt—around $250 trillion worldwide.
The coronavirus crisis has made "trillion" a household word. People now casually throw around trillion-dollar figures as something trivial. They act as if money grows on trees.
Money Is Growing on Trees
Indeed, money now seems to be growing on trees. There is no other way to describe the absurdity of what is happening. Either money is growing on trees or all economic theory known to date has been wrong. Money supply can be unlimited, and we need not fear inflation. Debt does not need to be paid back. No return needs to be made on an investment. Everyone can be trusted with blank checks. The party is never over.
Above all, the government is spending as if money grows on trees. The crisis has only accelerated the harvest. Legislators feel they have an obligation to pull out all the stops to secure the means to make this crisis as painless as possible. They arrogate to the government any powers needed to make it happen.
The government spending extravaganza is based on three wrong premises.
Help of Last, Not First, Resort
The first wrong premise is a misunderstanding of the government’s role in a crisis. The government can and should help people in times of national emergency. However, it cannot do everything.
The federal government should be the provider of last, not first, resort. According to the Catholic principle of subsidiarity, the most local body should be first to respond to problems. Afterward, larger social units can get involved. Intermediary bodies like the family, community, associations, and churches are the normal means by which people help each other in times of crisis. They are also the least expensive as services are often given freely.
Unfortunately, these intermediary bodies are in a state of great decadence. Many can no longer provide the support needed in a time of crisis. The false premise is that the modern government can perform the same function as the intermediate bodies and absorb their roles. The government will fail because its bureaucratic structures tend to be cold, mechanical, and extremely expensive. Government programs often do not serve individuals but trap them into a socialistic mindset of dependence.
There is no amount of money in the world that can do all that is now being promised. Governments have to rely on money trees to supply what is missing.
Throwing Money at the Problem
The second wrong premise is that throwing money at the problem will make it go away. The current government solutions are not resolving problems but merely papering them over with dollars. They are bankrupting the nation.
Problems are resolved by addressing their causes, not their effects. Thus, the decision to assume the expense of sustaining the economy with checks and payroll payments is a shotgun approach that does not address the real issues. Present compensation programs make things worse by making it more profitable to be unemployed for the crucial recovery months. The real issues involve risky decisions about getting people back to work as soon as possible.
Flooding every market with dollars to bolster the economy will not work in the long run. Real solutions must involve targeted responses to specific problems. They call for courageous decisions on the part of leaders who do not cater to the polls. Throwing money at problems leads to habits of dependency. It also leads to the government turning to money trees to supply the funds.
Engineering a Painless Crisis
The final flawed premise of those dealing with the coronavirus is their assumption that all measures must be painless. The crisis must not cause people undue suffering. To reduce the hardships, the government must try to satisfy all needs, for everyone, and at all times. Failure to do so will have political consequences.
This premise is based on a modernist conception of a world without God. This view holds that everything can be resolved by government and technology alone. It denies the reality of a fallen human nature that accounts for tragedy and suffering.
Thus, to limit the suffering caused by the crisis, governments must prescribe total lockdowns and draconian measures to fight in vain against the inevitable course of the virus that will infect populations. Government stimulus programs and hand-outs must underwrite the massive economic damage caused by these lockdowns. It must assume payrolls and cover generous unemployment benefits.
To accomplish this impossible task, the government must turn to trillion-dollar money trees to provide free money.
Money Does Not Grow on Trees
Of course, money does not grow on trees, despite efforts to turn the Fed into a money-fruit orchard. Such money always consists of borrowed funds that will weigh down the future and destroy a sound economy. Governments that play with trillion-dollar fires will always get burned.
Real solutions come from limiting the role of government, targeting aid to the right places, and accepting the pain and suffering that crises bring. Acting correctly in times of crisis is a moral problem, not an economic one.
Money trees like golden egg-laying geese, never work in the long term. There will come a time when greedy legislators will want more cash than the trees can produce. Someone will get the bright idea to chop down the trees and tap into the hidden money reserves inside. That’s when everything comes tumbling down.
John Horvat II is a scholar, researcher, educator, international speaker, and author of the book Return to Order: From a Frenzied Economy to an Organic Christian Soceity--Where We've Been, How We Go Here, and Where We Need to Go. He lives in Spring Grove, Pennsylvania, where he is the vice president of the American Society for the Defense of Tradition, Family and Property.