We need a massive economic response to counter the threat of the coronavirus
The United States is facing what could become the most serious economic crisis since the Great Depression of the 1930s. We must therefore take immediate, large-scale, once-in-a-century action to protect our public health and our economy.
Just like the coronavirus pandemic itself, it is hard to imagine the magnitude of the possible economic devastation. A recent poll finds that almost one-fifth of American families report having lost their jobs or had their hours reduced because of coronavirus. Kevin Hassett, the former Chair of the President’s Council of Economic Advisers, says we could lose up to 1 million jobs this month. The stock market has dropped more than 30 percent from its peak. Goldman Sachs lowered its first-quarter GDP growth forecast to zero and estimates that GDP will contract at a 5 percent annual rate in the second quarter. Economists believe that the global pandemic has caused a global recession.
The economic threat we face is massive because the steps we must take to contain the virus—especially staying home—will inevitably harm our economy. Seven million Bay Area residents already are sheltering in place; residents of other major cities may soon join them. As of Wednesday, thirty-nine states have closed public schools, with 42 million children home from school. The NBA, NHL, MLB and other major sports leagues have shut down. Broadway shows, festivals and concerts have been canceled.
When stores and stadiums are empty and our cities look like ghost towns, consumer spending—the lifeblood of the economy—will lessen by hundreds of billions if not trillions of dollars. The implosion in spending will lead to millions of fewer jobs, to even less spending—a downward spiral with no obvious end in sight.
The Federal Reserve has taken unprecedented action to stimulate the slowing economy by slashing rates to almost zero percent, buying $700 billion in bonds to stabilize financial markets and launching a commercial paper facility to ensure companies have a market for their short-term debt. However, even these bold emergency measures may not be enough.
Congress and the White House must work together to lessen the economic damage by injecting stimulus into the weakening economy. It is essential to provide large-scale support for small businesses who have lost customers and had to shutter operations. And we should put money directly into the hands of those who will be hurt most by measures necessary to contain the virus—workers who have lost their jobs or had their hours cut drastically and employees who have done the right thing and stopped going to work because they were sick. It is critical to provide laid-off workers substantially higher unemployment benefits for an extended period of time.
We should cut a large check to American families to give them the means to support their families and the economy, and we should be prepared to do it regularly until the economy begins to recover. Sens. Cory Booker (D-N.J.), Michael Bennet (D-Colo.), Sherrod Brown (D-Ohio) have proposed providing a $2,000 payment for each adult and child immediately with additional payments in the summer and fall if the nation is still facing a crisis.
One of the most effective forms of economic stimulus would be to substantially increase the portion of Medicaid costs covered by the federal government. Medicaid costs will soon explode as workers around the country lose their jobs, putting enormous pressure on state governments, many of which are forced to balance their budgets. The states desperately need our help to avoid cutting Medicaid in the middle of a public health crisis. The recent House-passed bill moved us in the right direction—we need to go even further.
If the estimates of the probable economic devastation of the coronavirus are correct, the fiscal stimulus should be substantially larger than the over $900 billion (in today’s dollars) in the American Recovery and Reinvestment Act, which in 2009 helped begin to pull the economy out of the worst of the recession. The White House is calling for $1.2 trillion—even that may be too little. Let’s shoot higher—$1.5 trillion for a start—with more kicking in if conditions continue to deteriorate. Fiscal policy makers need to match the willingness of monetary policy authorities to do “whatever it takes” and ensure that the size of our response scales with the loss in spending elsewhere in the economy.
We must be bold and move quickly. This is no time for a wait-and-see approach or for half measures. As someone who grew a successful business that thrived for decades, I know that “penny-wise-and-pound-foolish” and “too-little-too-late” can be fatal errors. Ten years from now, I would rather look back and have done too much than too little or too late. For the sake of our country, let us work together to quickly craft an economic response equal to the massive economic threat before us.
Don Beyer represents Virginia’s 8th District and is vice chair of the Joint Economic Committee. You can follow him on Twitter at @RepDonBeyer. You can follow the Joint Economic Committee Democrats on Twitter at @JECDems.
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