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Sen. Mitch McConnell, Treasury Secretary Steven Mnuchin, and Sen. Chuck Schumer attend a meeting on Capitol Hill last Friday to negotiate the “Phase 3” coronavirus stimulus bill. (Drew Angerer/Getty Images)


Understanding the stimulus bill

What’s the purpose of lawmakers’ $2 trillion proposal?

The U.S. Senate and the Trump administration have spent the better part of a week now moving the country toward a $2 trillion fiscal stimulus package designed to address the explosive economic costs of the coronavirus threat. The American economy has come to a virtual halt for the past week or so, and it’s likely to be in such a state for another couple of weeks, maybe longer. Lawmakers are under pressure to somehow prop up the economy through various mechanisms available to the legislative branch.
The basic formation of the stimulus bill largely came out of the Treasury Department, driven by Secretary Steven Mnuchin. Also leading the charge were Sens. Mitch McConnell (on the Republican side) and Chuck Schumer (on the Democratic side). Early Wednesday morning, McConnell announced the parties had reached enough agreement to pass the bill, and planned to bring it to a Senate vote by the afternoon. President Donald Trump is widely expected to sign whatever Congress puts before him.
What does the bill mean to everyday Americans? Will it prove effective in mitigating the economic damage done by the coronavirus and by our societal quasi-shutdown?
The bill is largely divided into four categories:

  1. Small business damage control
  2. Direct support to taxpayers
  3. Corporate liquidity
  4. Healthcare support

The first category, small business damage mitigation, is perhaps the most important. It addresses the expected spillover effect of the coronavirus crisis on the U.S. economy in the latter half of 2020: Restaurants and shopping malls are hurt immensely by two to four weeks of closure, but their ability to keep employees on their payrolls in the months that follow will be paramount.

This portion of the stimulus will primarily take the form of loan forgiveness, whereby small businesses can borrow money from their banks, while the banks get government guarantees and relief from having these loans count against their regulatory capital. Other measures—such as the deferral of payroll taxes due—will help a great deal as well.
The second category strikes me as less efficacious as a stimulus strategy. It consists of direct payments to Americans—reportedly up to $3,200 for a family of four. With payments in the range of $1,000 per adult and $750 per child (proposed amounts have been all over the map), this measure is intended to provide cash support to families who have taken a financial hit this month (and will next month). Other plans for “Main Street”: a temporary suspension of taxes due (until July 15), a temporary suspension of student loan repayments, and various other tax refunds and subsidies.
The third category is crucial but more controversial, and involves billions of dollars in financial support for large businesses impacted by the coronavirus crisis through no fault of their own. Think airlines, hotels, cruise lines, and so on. The idea is to add government resources to a loan program the Federal Reserve has created to support troubled industries. The loans would come with favorable terms for the businesses, but with rules restricting stock buybacks and executive compensation. (Last-minute wrangling over the bill has apparently created a five-person “committee” that will oversee this program.)
Finally, the fourth category, healthcare support, is where there is the least pushback from the American people. This involves hospital funding, state and local support, increased supplies, scientific research, etc. The success of this portion of the stimulus plan will depend on its execution—that is, on the reduction of bureaucracy.
There is, and ought to be, great questioning about how a nation $23 trillion in debt will pay for all this. But that hasn’t been a primary focus during this crisis. Economists would argue (including yours truly) that the cost of this stimulus now is likely much less than the long-term economic cost (and impact to national debt) that we would incur by allowing the current economic crisis to skyrocket in severity.

That said, the idea of taking emergency measures now, and seeking to reduce their costs later, has little precedence in American government. Furthermore, the role of the nation’s central bank—the Federal Reserve—as a tool for debt monetization is concerning. True, the agency can “create money” to the extent that it legally controls open money market operations, but ultimately, the Fed’s practice of simply monetizing the government’s excessive debt is untenable, ineffective, and a long-term hammer on real growth. The “Japanification” of the American economy is under way, and not attractive.
We need more clarity on the specifics of the stimulus plan in the days to come, and we need real competence in its administration in the months to come. But let’s remember: The ability of a government to deal with financial emergencies is greatly enhanced when, before the emergency, its own fiscal house is in order. The same is true of individuals and families, of course. We would be better prepared for this needed stimulus had we not ratcheted up our debt in the good times.

That lesson has few future chances to be really learned.

—This story was updated on March 25

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iStock, modified by World

(iStock, modified by World)


Wagering away wages

Sports betting is growing quickly in Nigeria and enriching foreign companies

Jonathan Michael walked into one of the shop spaces on the top floor of a three-story business plaza in Abuja, Nigeria. He selected four soccer matches on one of three available desktops, made his predictions, and collected his receipt stub from the shop attendant.

It’s a weekly ritual for Michael, who works at a barbershop in the same plaza. He placed his first sports bet in 2017, and now spends no more than two dollars at his weekly visits.

Sports betting is a lucrative business in Nigeria and the most common type of gambling. In 2014, about 60 million Nigerians placed sports bets worth $4.99 million on a daily basis. That number steadily increased as more betting companies opened up outlets in similar shop spaces across the country.

Many participants see betting as a way to gain extra cash in the country’s struggling economy, and the prevalent soccer culture also boosts sports betting. Yet most sports gamblers lose money in betting.

More than 50 companies in Nigeria now provide access to betting in multiple leagues. Gamblers can predict the final score, a draw, or whether the home or visiting team will win, among other options.

Back at the bet shop, Michael agrees that economic hardship, backed by a love for soccer, pushed him to give it a shot: “At least if I could make money, it will help me.”

Yet in the past two years, he’s never won more than $4. Joseph Habu, a 26-year-old who comes in to bet at least four days a week, started playing the sport in 2016 and still has not secured a major win.

But it’s the few success stories that garner public attention. In March, one betting company announced that Michael Arowosegbe—a student—won $2,772 after correctly predicting 13 games.

Keleenna Onyeaka, an investment banking analyst, explained that, statistically, betting is designed for gamblers to lose. The companies begin the process by only revealing a fraction of the odds for each game.

“The reason they are able to do this is because they have a lot more and better quality data, which helps them get closer to the true probabilities,” he said. “Once they have this, then they can mathematically calculate the odds they offer us in order both to attract us to bet while staying one step ahead statistically.”

To keep business moving when soccer leagues are off-season, some companies offer virtual gaming, which uses computer-generated outcomes. They also offer betting on tennis and dog racing and through online casinos.

The international market has cashed in on the craze. British online betting firm Betway has opened branches in Nigeria, Kenya, Uganda, and Ghana. Slovakian DOXXbet and Russian-based 1XBet also operate in Nigeria.

In Kenya, the government last year introduced a 15 percent tax on gambling operators and a 20 percent tax on bettors’ winnings.

Ugandan President Yoweri Museveni in January opted to stop licensing sports betting companies completely. He said sports gambling diverts the attention of youths from hard work and encourages capital flight by foreign-owned companies. He called for financial literacy efforts to educate Nigerians about the cons of gambling.

Modestus Ahamefuna, a full-time gambler, disagrees with the idea that gambling promotes laziness. The mechanical engineering graduate lost his job last year and embraced gambling to sustain himself while searching for another job.

Ahamefuna said it requires time and effort to study the game and successfully forecast the outcome. He once bet less than $7 and won $1,000. But the week I met him, he lost at least $140 and couldn’t afford to pay for cooking gas.

Jonathan Michael, the barbershop worker, hasn’t had any big wins, “but I keep on playing—[and] hopefully one day.”

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Krieg Barrie

(Krieg Barrie)


Playing with ‘FIRE’

Extra-early retirement has become a new financial fad

The Protestant Reformation taught us that “vocation”—a calling from God—belongs to all Christians, not just clergy. Often this vocation expresses itself in our work, and in the last few years Gene Edward Veith, Tim Keller, and others have written books that help Christians develop a theology of work and vocation. At the same time, another movement has spread in America with a different perspective on work. Its followers call it FIRE.

FIRE stands for “Financial Independence, Retire Early,” and when people say “early” they mean very early. Many people pursuing a FIRE lifestyle dream of retiring in their 30s. Most workers in developed countries labor for 40 years before retiring, but the FIRE folks want their own lives to be mostly retirement.

People in the movement often trace FIRE’s rapid spread to a single blog post. Pete Adeney worked as an engineer for 10 years before retiring at the age of 30 thanks to a high savings rate and a frugal lifestyle. In 2012 he wrote a post, “The Shockingly Simple Math Behind Early Retirement,” that advises consistently saving half of one’s income. By his calculations a typical working career need not last more than 17 years.

Adeney’s blog post went viral, and the FIRE community developed a rule of thumb: Have 25 times your annual expenses saved in investment accounts, then retire. But what will early retirees do? In a 2016 post called “Happiness Is the Only Logical Pursuit,” Adeney describes the human person as “nothing more than a complex machine made of meat,” and he suggests people should do whatever gives them a hit of dopamine.

One person at a FIRE meet-up in Houston, former car seller Chris Stam, told the group that anyone not working toward a 50 percent savings rate is not making progress. Stam retired last year at age 47 so he could “live life” while still young enough to enjoy it. He struggled to articulate what he does all day, but he assured everyone he stays busy: When he retired he gave himself “self-care” and likes choosing what he does and with whom he does it.

Tristan Sarremejane, a 29-year-old structural engineer from France, also was at the FIRE meet-up. He likes his work but doesn’t want to do it for the next 30 years because it leaves him insufficient time for leisure. He and his wife, a Texan, don’t have children yet, but he says a desire for family prompted his interest in FIRE. He fondly remembers his own childhood in France: His parents, who were teachers, had months of vacation time each year.

Some people note that focusing on early retirement can become a selfish squandering of talents. Vicki Robin, 73, wrote Your Money or Your Life in 1992, years before FIRE existed, but many leaders in the movement cite her book as inspiring their journey. In the book, Robin advocates getting out of debt, building wealth, and having a life of service to others: “We are not just lone wolves out there for our own personal agenda—for our own personal needs, wants, and desires. Lives shine when people discover how to be of service.”

Robin defines jobs as what we do for money, but “work” is something we do to improve our community and the world. Her emphasis on work echoes the Christian doctrine of vocation, and she’s right to reject the goal of retiring early to focus on ourselves. Christians can prepare for paying careers that satisfy and also allow us to be of service in business or nonprofit work—but there’s nothing wrong with seeking financial independence. What matters is whether our heart’s desire is to love God and our neighbors through our work, paid or unpaid.

—Collin Garbarino is a World Journalism Institute mid-career graduate

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