Stimulus stumbles cry out for a digital dollar
It seems like just yesterday we watched lawmakers push their negotiating skills into overdrive so they could hastily cobble together the bipartisan, $2.2 trillion CARES Act, which was approved in March.
That mad dash was necessary, we were told because COVID-19 was about to push the U.S. economy over a cliff. So, they reasoned, there was no time to fret over details.
Now, more than three months later, details are starting to emerge and, predictably, they aren’t good.
For instance, have you heard the one about the million-plus dead people who received $1.2 billion in CARES relief payments courtesy of the Treasury Department and the IRS?
That’s not a joke. It’s a key finding in the General Accounting Office’s recently released CARES report. That’s right, even though at least 30 million living, breathing Americans still have not received a dime of the aid they were promised last March, 1.2 million dead people have.
No one is rejoicing at this news (except maybe the relatives of the decedents, since the Treasury admits there is little hope of recovering the funds).
However, it is conceivable some lawmakers may be feeling a small twinge of schadenfreude about now.
Why? A quick recap: Last February, as government officials hammered out the details of CARES — which turned out to be the biggest government relief package in history and included $1,200 relief checks for eligible taxpayers facing economic Armageddon — both Sen. Sherrod Brown, D-Ohio, and Rep. Maxine Waters, D-Calif., fought hard to get those relief checks paid out in digital dollars using decentralized technology.
Not only would this speed up payments, they reasoned, but it would also cost taxpayers a fraction of the cost of issuing paper checks and government debit cards. Not only that, but blockchain-based payments would be highly traceable, making confirming the receipt of the cash easy. Another plus: Digital dollars would draw millions of unbanked and underbanked Americans into the financial fold. Finally, digital payments would alleviate any concerns about mailing out germ-infested checks and cards.
All sound arguments, but, for reasons still unclear, digital dollars were never included in the final CARES bill signed into law March 27. Perhaps, because everyone was in such a rush, lawmakers reasoned there wasn’t enough time to put the needed blockchain infrastructure in place.
But, Rep. Darren Soto, D-Fla., was undeterred. Weeks after CARES was signed, he spearheaded a second, bipartisan push to get Treasury Secretary Steven Mnuchin to reconsider using blockchain to distribute relief funds. Mnuchin never responded and Soto has since acknowledged the Treasury lacks the necessary infrastructure for a fully scaled blockchain payment system. But he also believes a small-scale use case would be a good place to start since the U.S. is already falling so far behind other countries now using blockchain. “You have to start somewhere,” Soto said.
Similar sentiments were echoed just last week when the Senate Banking Committee conducted another round of digital dollar hearings. Expert witness (and former head of the U.S. Commodity Futures Trading Commission) J. Christopher Giancarlo urged senators to at least consider approving “pilot programs” to test out a digital dollar. To make this more palatable, he asked them to consider the bold leap their predecessors were asked to make when funding the early days of the space program. Either that, he said, or continue relying on a payment structure marked by “slowness, expense and exclusiveness.”
Admittedly, digital dollars would not have solved all the problems called out in the GAO’s recent report. For instance, it’s unlikely they would have helped with the beleaguered $500 billion Paycheck Protection Program, which paid small-business owners to keep employees on staff. PPP has been controversial from the start, but the GAO report found the program’s lax oversight makes it especially vulnerable to fraud.
Similarly, digital dollars would not have curtailed egregious CARES expenditures like giving United Airlines $58 billion in relief money only to have the company turn around and warn employees of pending layoffs this fall.
Considering these multibillion-dollar embarrassments, news that a million cadavers got cash, even $1.2 billion, seems like relatively tame.
But a blockchain-based digital dollar deserves serious consideration if only because its adoption would mark the beginning of a modern, more efficient government payment structure.
Consider an earlier GAO study from 2017 where the watchdog agency found that “improper payments have consistently been a government-wide issue” for federal agencies including HHS, Medicaid and the IRS. Between 2003 and 2107, the GAO concluded, mistaken payments cost taxpayers $1.4 trillion.
That’s at least 1.4 trillion reasons for lawmakers to start taking digital dollars seriously. Like Rep. Soto said, you’ve got to start somewhere.