Any additional coronavirus assistance from Congress should primarily focus on giving money directly to Americans, venture capitalist Chamath Palihapitiya told CNBC on Tuesday.
“We know that this economy is always consumer-driven. It’s consumption that drives growth in the United States. It drives jobs and capital allocation, and the more money in the hands of individuals the better they can be at supporting businesses, buying different products,”
While lawmakers in Washington and the White House are still stuck in stimulus negotiations, Palihapitiya said he believes there is a pain in the U.S. economy that needs to be addressed as it climbs out of a coronavirus-pandemic-induced recession.
“Unlike other recessions where you do not know where the bottom was, this recession was actually quite easy … the bottom was the first few months because literally everything was shut down so we went to zero,” Palihapitiya said, who was an early Facebook director. “Now we are slowly returning to normalcy, but the reality is that the economy is not a great place.”
However, it would be a mistake for Congress to provide additional assistance directly to companies, according to Palihapitiya. He has previously been critical of some provisions of the $ 2.2 trillion CARES Act, which was approved in late March, as well as the Federal Reserve’s extraordinary monetary response. In early April, he said the government’s response benefited billionaires and hedge funds at the expense of most Americans.
As part of previous relief efforts, there was a round of direct payments to Americans and a weekly federal boost of $ 600 per month. Week for state unemployment insurance. Unemployment benefit expired in July. President Donald Trump signed an executive order last month with a partial alternative.
“The first phase of the stimulus was, quite frankly, wasted. A lot of that money was sent to companies. These companies did not distribute them properly,” he said Tuesday. “They still ended up firing tens of thousands, if not hundreds of thousands of employees, just literally the day after the stimulus said they could. The money was not functionally useful.”
Some major U.S. airlines have said they plan to advance or lay off thousands of employees maybe as soon as next month, after $ 25 billion. in Covid-19 industry support designed to protect aviation job expiration. Airlines and congressmen have been pushing for further support to retain jobs in the industry through next March.
More than 5 million loans were approved through the Paycheck Protection Program, which was set up to help small businesses across the country keep people busy as they struggled with government restrictions and a shift in consumer activity due to the pandemic.
Members of the Trump administration have proclaimed the PPP program to save jobs and lead to some of the strong employment gains that have occurred this summer. However, some recipients of loans – which can become subsidies if certain conditions are met – have warned that they probably still need to lay off anyway. Critics of the program point to the number of larger and in some cases listed companies that received loans as a shortage.
Palihapitiya said he believes supporting companies instead of initiating financial support directly to U.S. workers is actually prolonging changes in the economy that will happen anyway. “The more money we waste and give to zombie companies, we just want to push the can down the road, and that’s all unnecessary.”
Also during his “Squawk Box” interview, Palihapitiya announced that his SPAC, Social Capital Hedosophia II, will acquire Opendoor, an online marketplace for buying and selling homes. The special-purpose acquisition company trades Opendoor for $ 4.8 billion.