My Debt Moratorium Proposal As A Stimulus Package

America and the rest of the world is an economic crisis. Most of us understand this. For the politicians, the economic crisis is about the November elections. For the rest of us it is about how we are going to deal with the added expenses of keeping kids home and, for some of us, having to deal with reduced paychecks from stay-at-home orders or furloughed workers. As a business owner there is both peril and opportunity to the crisis.

As readers likely know, Congress is locked in a battle to push forth an economic stimulus package. Like during the 2008 housing crisis, the bailouts are intended to keep the global markets humming along. No country wants the global economy to crash. Not one country can afford the economy crashing. As such, the bailouts, or stimulus packages are intended to keep the global economy working.

What is different this time around is the extent of the economic chaos and how long it will take to stabilize the work forces. Workers are largely going without paychecks and that will trickle down through the economy. It will be seen in credit card defaults, missed rent, mortgage and car payments. These are just the start as businesses will now take the opportunity to use the chaos to restructure their workforces.

We will look further into how the workforces will change post the 2020 economic crisis. For now, think of it as an opportunity for companies to shed inefficient or troublesome workers without penalties and to reduce the workforce by implementing technology to further reduce costs.

None of this includes the chaos of the medical system and healthcare in general. The Trump administration has removed the “mandate” on ObamaCare and as such the program is no longer viable. Healthcare remains the broken promise.

But the stimulus package before Congress has broken down around bailouts for companies. The argument being that the workers should get relief before the companies do.

That is true. But how to do it.

The Republicans want money to give to the large corporations so that they can keep their workforce intact. That will not work because for companies their largest expense is the workforce. Changing or updating the work force is disruptive to business so it is updated at a slow pace. But with businesses already disrupted, many companies will likely take the opportunity to implement the changes they want for their workforces as the disruption continues.

Giving large companies money to keep their workforces intact does not guarantee that everyone that had a job previously will have one after the chaos subsides. Even if the money is given with conditions.

Not all companies are the same. The term “small business” does not apply to micro businesses, like mine. A “small business” are larger businesses that the federal government considers a “small business”. The Small Business Administration (SBA) considers a “small business” to be one that has annual sales between $750,000 and $35.5 million.

You read that right, annual sales of $35.5 million is considered a “small business” by the SBA.

The SBA also considers a “small business” as one that has between 100 and 1,500 employees.

Notice how nowhere in those requirements does a mom-and-pop shop fit nor do the smaller business, like mine. In my case, I have less than 100 employees and my annual sales are below the half-million dollar mark.

Clearly, my business, like many others, would not qualify for the stimulus packages being argued over at Congress.

Another issue is how much, if any money, will be going directly to the people. The public numbers are that $1,000 will be given to each taxpayer. Maybe an additional $500 to each child.

But here are the unanswered questions. Is the money a loan against future tax payments? Will the money be taxed? If so, at what rate? Will the money be nothing more than an advance of the tax withholding taxpayers already make via their payroll checks? Clearly, there are no answers to these and many more questions.

Taxpayers may not like the answers once they become known.

Too many people are hung up on whether “rich” people should also get the checks without realizing that the “money” may be nothing more than the money the taxpayer already gave Uncle Sam in payroll with holdings and come tax time, they may be shocked to learn that they owe that money to the government.

But like everything in a bureaucracy, the simplest solution is always ignored.

The easy solution is to put a moratorium on all debt payments for 60 to 90 days. That means no credit card payments, no mortgage payments and no car payments. All debt is put on hold without incurring finance charges or negative reporting. Student debt would obviously be included.

That would go for businesses and individuals alike.

Is it fair?

Let’s look at it.

Americans spend an average of 40% of their paychecks in debt payments. No payments during the debt moratorium means that Americans can keep 40% of their paychecks for 30, 60 or 90 days.

Almost all businesses have some sort of debt. Most “small business” would get immediate relief with a moratorium on debt, just like consumers would.

How about the banks?

Banks made over $30 billion in just overdraft fees in 2018. That is money paid for by the people that would benefit from debt moratorium. But what about the moratorium on the interest on the debt?

JPMorgan Chase, as an example, reported $36 billion in profits in 2019. Of that amount, $6.3 billion was generated from interest on consumer debt. Other major banks have reported similar results. Clearly, the banks can afford it. But is it fair?

During the 2008 economic crisis, the U.S. government gave the banks a $700 billion bailout. Consumers saw little benefit from that bailout.

It may not be fair for the banks, but the debt moratorium will not put them out of business.

This, of course brings us to individuals who have little to no debt. Renters, for example, would not benefit directly because rent is not considered debt. But landlords would benefit with not having to make mortgage payments. Many, if not all, will not automatically pass on the benefit to their tenants but legislatively that could be required as part of any stimulus package.

My debt moratorium proposal is not perfect, but it is much better than what is being proposed by the government. Skipping debt payments helps many families. It costs the government very little in direct expenses. And, it is immediate.

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