The Xi Plague is perhaps the deepest challenge the world has faced since WWII. It didn’t have to be, of course: as evidence, opposed to dodgy modelling, mounts, the virus is turning out to be a lot less scary than it was made out to be. As it turns out, the big challenge created by SARS-CoV-2 is not the virus but the hysterical panic it has engendered.
Governments who squandered vital early weeks by refusing to close borders or at least screen incoming travellers, then panicked and imposed wholesale shutdowns. That, in turn, has created an economic crisis not seen since the Global Financial Crisis, if not the Great Depression.
Worse, everyone seems hell-bent on hitching Xi’s pale horse to their personal ideological wagon. Whether it’s Greens peddling their vision of a de-industrialised world or racists willfully tarring local Chinese populations with the sins of the Xi regime, the virus is apparently whatever opportunity anyone wants it to be.
Not ones to be left behind, some of the American left are flogging the horse of rent cancellation.
In reality, it would assist the rich, but that’s not the only problem with it.
[Keeanga-Yamahtta] Taylor says 20 per cent of tenants in the US have not paid this month’s rent. And of course we know why: 33 million people in the US have filed for unemployment since the pandemic began, and since housing is usually the greatest of all household expenses, cancelling rent seems like a fair solution, to avoid evictions, and also foreclosures, as investors also go under (most use rent to pay the mortgage.)
Here’s a better question: how? Because where would you start?
How does anyone decide how much rent to cancel? All of it, for everyone? Regardless of your balance sheet? Regardless of the landlord’s? Whether it’s your biggest expense or your smallest? Whether you have nowhere else to go, or not?
The problem with cancelling rent is that it’s too prescriptive.
It doesn’t take into account the individual circumstances of renters and landlords.
As Thomas Sowell shows, in Basic Economics, rent controls invariably push up prices and reduce supply. Wholesale rent cancellation would surely be no better. Pulling the rug completely out from under the market would almost certainly lead to a collapse in supply. In the Depression, farmers ploughed crops back into the fields because there was no money to be made from them. Landlords won’t pull down their investment properties, but they will dump them. Who’ll have the money to pick them up?
Which is not to say that governments shouldn’t continue to bailout individuals, instead of banks, and airlines.
Of course they should.
The Morrison government is doing this, by doubling JobSeeker, and introducing JobKeeper, and making child care free, and so on.
But honestly, the best way to assist Australians during this pandemic would simply have been to adopt the Rudd model.
Rudd’s program — go hard, go early, go households — provided urgent assistance to individuals, to spend as they saw fit.
The problem with the Rudd program was, firstly, that it handed out the money with no consideration to individual circumstances. The Morrison approach, while it might be onerous to file Centrelink claims and so on, at least goes some way to channelling scarce funds according to need.
Secondly, Rudd didn’t know when to stop. The first Rudd stimulus was a much-needed jolt to a teetering economy. From there on, though, it became a wasteful sugar-rush.
The Morrison government has had no problem committing stimulus that adds up to around $7600 per person, or $18 billion, compared to about $10 billion spent by Rudd.
That’s fair enough – but the circumstances in 2020 are for more dire than 2009. The GFC was, above all else, a banking crisis. Say what you will about them (and the less said, frankly the better), Australia’s big banks were far better positioned than the US or the UK.
The COVID-19 pandemic is particularly threatening to Australia both because of an economy stalled by lockdowns and because of the pain that will inevitably accompany restructuring the economy away from China – as must be done if Australia is not to be humiliated as a mere vassal-state to the Xi empire.
If the government is going to try and restart the economy, it’s not going to do so by crippling the housing market. But leaving renters to flounder isn’t going to help either.