Third corona crisis support package: good news or bad?
The government has announced another support package for entrepreneurs and businesses of 6.7 billion euros. It is already the third support package the government has announced in the corona crisis yet there is still little discussion among economists as to whether this is reason for concern. Shouldn't the tap be turned off at some point? And what are the long-term consequences of the current policy? Casper de Vries, Professor of Monetary Economics at Erasmus School of Economics, discussed this and more at BNR News Radio.
According to de Vries, current government policy is by the book. 'This is simply what all standard economics books prescribe. And what we’re spending now we’ll gain back as well. At a certain point you have to start taxing the people and companies that did well in these times extra.' According to de Vries, it is primarily a redistribution issue. ‘It’s a bit of kickback, but the Netherlands can still manage this very well. Nevertheless, the current policy is not perfect and there are still some comments to be made’, says de Vries. 'The first is that we should have thought a bit more about the effects on education. And especially in terms of supporting children who are lagging behind. The other thing is that banks continue to scale back the generous terms of loans.' According to de Vries, this also has a negative on the economy and is something that the government is still not paying enough attention to.
De Vries believes that the companies and employees who are currently doing well should hand in a little more as a sign of solidarity towards others. ‘I am a professor at Erasmus University and have a steady job and a steady income. It would not be a problem to add some extra solidarity tax to that,' says de Vries. Especially for companies it is very easy to see which ones can hand in a bit more. ‘Companies that are currently making great profits can be taxed a little more. To me, that seems to be the right way to go in terms of solidarity.’ In practice, of course, this is already done through profit taxes, but according to De Vries there should be a temporary measure whereby companies and employees who are currently doing well have to give up a little more.
Costs on education
There are also economists who criticise the current policy for the economic impact it would have on society, and especially on education. They claim that every week that schools are closed in the Netherlands costs 10 billion euros in the long run. 'Education is only seen as a burden, and not as a revenue. This is because it is very difficult to predict the gains of education in the far future, and then translate that back to the present.' According to de Vries, it is very important to provide support for education, but there needs to be more clarity about what that support is meant for. ‘During the previous round of financial support of 4 billion, the teachers were left in the cold. The support was used by the school boards for other things.'
According to de Vries, the real problems are going to come in 5 to 10 years, when the aging of the population reaches a global level and there will be a shortage of labor. 'At that point, prices and interest rates will start to rise and then the problems will come.' According to de Vries, the Netherlands would still be able to manage these problems, but for other countries it would be much harder.