A Proposal during the Pandemic to help small businesses asked to perform a social-welfare function

 

A Proposal during the Pandemic to help small businesses asked to perform a social-welfare function.

Economics Without The B.S.**: 
[**  Double entendre intended.]

So far, restaurants not recovering in the usual March to August time period -- data is only up to June.

If we are asking restaurants to operate at half capacity while we deal with the pandemic, are we asking them to perform a public welfare function? Should localities be paying for/reimbursing businesses for performing a public health function?

Can we do this by floating (selling) a bond issue by the local government, and the bondholders would be paid by the localities raising the sales tax? Can we float the bond on the public market, like other municipal bonds? Or, can the federal government/state government subsidize the bond's issuance? Or better yet (?) can our Fed be the buyer of the bonds, to subsidize the issuance, keep the bonds on their balance sheet as inactive reserves (like they did with mortgage pools from the Financial Crisis of 2008), not part of the money supply, somwhat similar to what any central bank does when a nation goes to war? -- this is sort of a national emergency.

https://fred.stlouisfed.org/graph/?g=uD5x

What's wrong with this picture?

 What's wrong with this picture?

Economics Without The B.S.**: 

[**  Double entendre intended.]

Notice a problem? What does it take to keep our economy going?

[The Monetary Base is not our Money Supply, it is the money kept among the Federal Reserve Central Bank and its member banks. It also includes money in circulation.]

  

[My answer] Short-term financing of long-term projects -- our capital markets, which are used to provide funding of capital projects, relies on international markets that are dominated by wealth funds/private equity/hedge funds/shadow banking since the 1990s that can easily transfer their funding.  This is a source of instability for projects that need constant funding of long-term projects; it means their operational costs are not fixed for the long-term but quite variable.

So the Fed steps in as a moderating force/counter-weight to keep markets "calm", stability.  A policy of economic stability that keeps interest rates low and one of moderation that keeps an economy "humming" at an optimum level that is below peak performance.

Peak performance:  The best performing economy we had was from the mid-1950s to around 1974, with the peak performance at 1965/1966 -- in addition to high rates of economic growth we also had the least income inequality, it was a period where our productivity gains were broadly shared in society and among the various business sectors.

 

https://fred.stlouisfed.org/graph/?g=uhJ8

The problem is the Fed role has become that of a market-maker/market-participant and not just a market-regulator, an expansion of its role as the lender of last resort, now a buyer (of international assets, like mortgage pools/CDOs, etc.) of last resort.

[Problem?] If democratic societies need a vibrant political climate to accommodate change, does an economic policy of stability impede political progress?  And if the United States is the world leader in advancing democratic values, does this economic policy get in the way of that effort?