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March 25, 2020 - Dennis Prager Show
09:23
What's in the Covid-19 Stimulus Package?
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And I have as my guest Michael Strain.
He is Director of Economic Policy Studies at the American Enterprise Institute and author of the new book, The American Dream is Not Dead, But Populism Could Kill It.
I had him on, and I was impressed.
And that is his most recent book.
Michael Strain, are you at home right now?
Hi.
I am.
I am sheltering in place.
If I may ask, whom are you sheltering with?
I'm sheltering with my family, and my wife has a job.
She's a high school teacher, and so she has a pretty strict schedule of online teaching she has to follow, which is making working from home difficult with our two kids at home as well.
How old are your kids?
They're both under the age of four, so they have needs.
Wait a minute.
You mean they're not just listening to your wife's teaching?
That's right.
Oh, God.
If we do this for another two months, they're going to just be listening to Disney+.
No, no, no.
If we do it for two months, you will be listening to Disney+.
That's right.
That's right.
That's my prediction for your life.
It's truly strange.
So are you writing more?
What are you doing?
Well, I'm trying to do what needs to be done.
I've put out a paper on the government's response to this.
I've been keeping up my Bloomberg column.
I've been trying to do a lot of media for the new book, The American Dream is Not Dead, which all your listeners can purchase on Amazon today or from other sources as well.
And I've been spending a lot of time on the phone talking to people.
On Capitol Hill and in the administration, trying to offer any advice I can to help push Congress in the right direction.
All right, let's talk about the bill.
So, there are so many questions I have, and I'm sure my listeners will have the same questions and their own.
So, let's begin with, where is $2 trillion going?
$2 trillion is going to several places.
A big chunk of it is going to households in the form of checks.
And so depending on your income level, you're going to get a check from the government of $1,200 or thereabouts.
So a lot of the money is going there.
A big chunk of the money is going to expand the unemployment insurance system.
To provide some extra money to people who get laid off during this time.
A chunk of money is going to small businesses and that is technically a lending program where a small business can take out a loan to spend on payroll or rent or other expenses.
But if the business spends that money on payroll, on workers' wages, then that loan is forgiven by the government.
So it's an effective grant.
Wait, wait, wait.
Let me understand.
So what would the loan be spent on if not for the employees?
You mean for the owner himself?
So if you spent the money on new equipment, things of that nature, if you spent the money on repainting the store, that sort of thing, then the loan is not forgiven.
And what percent, if you know, what rate is the loan at?
The rate will be at kind of a standard market interest rate.
So is that now 3%?
You know, it'll depend on, you know, a number of things, right?
It'll depend on characteristics of the business, on the industry the business is in.
All right.
So, okay.
So, let me review here.
A big chunk is going to $1,200 to people under a certain...
A big chunk is going to people for unemployment benefits, and a big chunk is going to small businesses to help their employees.
Did I get that right?
That's right, but there's more.
Okay, go on.
So then a big chunk is going to big business.
There's a $500 billion fund.
That's going to make loans to large business and it's designed to support industries that are in distress.
That's where money for the airlines is coming from, for example.
Then there's a smaller amount of money that's going to the health system and a smaller amount of money that's going to provide aid to state and local governments.
So there's a lot in this bill.
There's a lot in the bill.
What happened to the Pelosi additions of, if the airlines get any loan, they have to meet carbon requirements.
Companies have to have a certain number of women on their boards.
Have those all been dropped?
So I believe that those have all been dropped.
But, you know, it's important to remember that this bill is not a law, right?
So this bill was passed by the Senate, and it has the support of the Treasury Secretary.
But this has to go through the House of Representatives as well.
And the last time I looked, it's not clear.
So why did the stock market react so positively if it's not passed yet?
Well, the stock market started reacting positively yesterday morning.
And remember, it only passed very early this morning.
So the market expects...
A large amount of money to be spent and for businesses to have access to a large amount of loans and grants.
Wait, in other words, people assume that the Nancy Pelosi-run House will pass it.
People are assuming that the House will pass it or at a minimum that the House will pass something...
Similar enough that it'll be a big boost.
Okay, so now we understand the particulars.
What industries, the most obvious industries, let me put it that way, to my immediate thinking, that have been truly hurt, number one is airlines, number two is hotels, in other words, anything to do with travel.
Is that correct?
Oh, absolutely.
In fact, an item just popped up across my desk about hotel occupancy rates.
And they are down by about 70%, by about 60%, excuse me.
That's all?
I'm shocked that they're 40% full.
Well, they're going to keep plummeting.
They're going to keep plummeting.
If you compare the last, if you look over the last week, you see a decline of 70% in revenue per available room and 60% in occupancy rates.
And, you know, that's going to keep dropping.
It's, I mean...
I don't know how a lot of these people will stay in business.
I mean, it's...
Well, it's going to be terrible.
It's months...
It's never happened before, months of no revenue.
It has not happened.
No, that's right.
I mean, if you look at...
I'm sure many of your listeners are familiar with the website OpenTable.com, which you can go to to make restaurant reservations, and they publish data.
On restaurant diners.
And if you look, if you compare one month ago, you know, late February to today, restaurant reservations have dropped by 100%.
Yes, exactly.
All right, hold on there if you would.
Michael Strain is the Director of Economic Policy Studies, obviously an economist, American Enterprise Institute.
His new book is The American Dream Is Not Dead.
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