A Forward-Thinking Policy
Response to the Coronavirus Recession
Mass layoffs, record
unemployment claims, and an unprecedented demand shock: With GDP projected to
decline at
least 5 percent
this quarter, the coronavirus pandemic has turned into a full-fledged
economic collapse. As Roosevelt Director for Progressive Thought Mike
Konczal explains in a new paper, we have the tools to slow the
recession and limit its impacts—while laying the tracks for a more
resilient economy in the future. For right now, Konczal proposes cash
and other direct assistance, strengthened worker protections, direct
aid to states and municipalities, federal loans for small businesses,
and structured industry bailouts (with terms to prevent future
extraction). For the long term: permanent stimulus at 2 percent or
more of GDP and a reconception of our fragile social safety net.
“Policymakers right now have the chance to put forward a response that
meets the moment we’re in: one that is large in size, broad in scope,
and sustained over time,” Konczal writes. “There is little risk in
doing too much to stabilize the economy; the danger is doing too
little.” Read
on.
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Moving forward:
“There are three essential aspects to the stimulus plan we urgently
need right now: It should be bold and equitable, it should
automatically renew, and its temporary programs should be able to
evolve into more permanent ones,” Konczal writes for The
Nation. Read
more.
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The need for fiscal policy:
“It's probably too late to stop a recession, but it's not too
late to stop a depression,” Groundwork Collaborative Executive
Director and Roosevelt Fellow Michael Linden writes
for CNN Business. “Emergency cash payments to
nearly all households as soon as possible can help prevent more
suffering and boost the economy at the same time. It should be the
next step, but it definitely cannot be the last one.” As Roosevelt
Chief Economist Joseph Stiglitz
told
CNBC this week, “it is clearly a case where
targeted fiscal policy is what is needed. It's been true for a long
while that monetary policies . . . only have limited
efficacy.”
How Much Stimulus Do We
Need?
“Is today’s crisis on the scale of
2008’s? It seems very possible that it is. And this time, of course,
there is no question of a 5 point fall in interest rates. The federal
funds rate coming into the crisis was only 1.5 percent,” Roosevelt
Fellow J.W. Mason writes for the blog. “So if we look back to 2008 as
a model of the kinds of demand shortfalls our economy can suffer in
the face of a severe shock, we should be thinking in terms of a 20
percent fall in private demand . . . And that implies a required
stimulus on the order of 13 percent of GDP, or $3 trillion—perhaps
sustained over multiple years.” Read
on.
Deficit
and Debt Shouldn’t Factor into the Recession
Response
“Given the magnitude of the crisis,
now is not the time for policymakers to worry about raising deficits
and debt as they consider what steps to take,” Roosevelt President
& CEO Felicia Wong, Center for American Progress President &
CEO Neera Tanden, Washington Center for Equitable Growth President
& CEO Heather Boushey, and Center on Budget and Policy Priorities
President Bob Greenstein write in a joint statement. “Even Harvard’s
Greg Mankiw, who chaired President George W. Bush’s Council of
Economic Advisers and who normally worries about rising deficits and
debt, has said, ‘There are times to worry about growing government
debt. This is not one of them.’” Read
more.
Business
Resiliency Requires Banning Stock
Buybacks
With hotels asking for a $250
billion bailout and airlines asking for
$50
billion, their history of
stock
buybacks is drawing renewed scrutiny. As
Roosevelt Fellow Lenore Palladino writes for the blog, in the last
five years, companies like Marriott, American Airlines, Delta, and
United have spent billions on buybacks, with funds that “could have
sustained employees through this crisis in the form of paid sick,
medical, and family leave.” Any bailout of the private sector, she
writes, “must be conditional on an end to the practice of stock
buybacks (a condition President Trump says he is “okay
with”), along with worker
representation on corporate boards going
forward, and broader requirements that companies keep workers on their
payrolls.” Read
on.
How the
Coronavirus Will Change the World
Permanently
This week, Politico surveyed
34 big thinkers on their predictions for a post-coronavirus
world—including Roosevelt Director of Governance Studies Todd Tucker
and Roosevelt Vice President of Advocacy and Policy Steph Sterling.
“In the years ahead . . . expect to see more support from Democrats,
Republicans, academics, and diplomats for the notion that government
has a much bigger role to play in creating adequate redundancy in
supply chains—resilient even to trade shocks from allies,” said
Tucker. Per Sterling, “The reality of fragile supply chains for active
pharmaceutical ingredients coupled with public outrage over patent
abuses that limit the availability of new treatments has led to an
emerging, bipartisan consensus that the public sector must take far
more active and direct responsibility for the development and
manufacture of medicines.” Read
more.
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