The US needs a coronavirus rescue Plan B — fast
If we are at war due to the coronavirus-created health and economic crises, then we should plan as if all plans might fail in whole or in part. As the cliché goes, no war plan survives the first shot being fired when chaos, unintended consequences and unforeseen developments overtake even the best plans executed by the best people.
This is all the more true now given the unprecedented scale and scope of the multiple simultaneous crises metastasizing quickly beyond our ability to keep up or even comprehend. Compounding all this is Dr. Fauci’s reminder that no matter where we think we are today, we are always going to be one, two or more weeks behind due to the inevitable lag in information from an invisibly incubating pandemic. That is also true for the synchronized global economic shutdown that is throwing tens of millions of Americans out of work and shuttering millions of businesses at unknown rates.
We all hope that the nearly $2 trillion rescue plan Congress and the administration are working on enacting this week is properly designed and will work, but it is not going to be immediately self-executing. It is untested, and it is going to take time under the best of circumstances. And these are actually the worst of circumstances.
In short, we need a Plan B, and we need it fast.
Leaving blame and fault aside, we should assume that the plan enacted this week will fail in meaningful ways. For example, assume that it fails to get cash to many Main Street families, almost all of whom live paycheck to paycheck and have no savings. They are going to face a catastrophic cash crunch within days — right at the same time the numbers of those who are sick and dying from the coronavirus are skyrocketing and 80 million Americans are sheltering in place.
Or assume the checks get to people but they are woefully insufficient to cover even basic needs or that people cannot get them cashed and end up relying on predatory check cashing companies. And while Main Street families are facing that cash crunch, they are going to see corporations receiving hundreds of billions of dollars in bailouts, undermining their faith and trust in government at precisely the time it is needed most. Treasury Secretary Mnuchin’s reported idea to have Goldman Sachs – or other reports that private equity firms close to President Trump like Steve Schwarzman’s Blackstone Group – administer the bailouts will only add gasoline to the fire.
This pressure-cooker is going to be intensified by nonstop TV reports of hospitals being overloaded, frontline medical personnel getting sick, critical shortage of tests and supplies, additional states sheltering in place and related emergency measures being taken. All of this will happen as the global conditions deteriorate as well.
Fear and desperation are likely to spike with frightening consequences, unless effective actions to meet the needs of people are taken immediately.
That’s why we urgently need a Plan B.
While there are lots of ideas out there, Denmark and the United Kingdom may have the best idea. They have enacted “no-layoff plans” that put cash immediately in the hands of all employees by reimbursing employers for 75 percent or 80 percent of those payments plus provisions to keep those companies from bankruptcy. There is actually a good argument that “Denmark’s idea could help the world avoid a Great Depression.”
Using employers’ existing payment systems and infrastructure can be a very quick, efficient and effective pass-through delivery system that can be activated immediately. There are additional key benefits here. First, receiving full pay will enable those employees to pay their rent, mortgages, credit cards and other bills. That downstream impact will help the people and companies receiving those payments from going bankrupt or needing immediate government assistance. Second, it will act as a pressure relief valve so that corporations don’t “have to be” bailed out immediately and will buy time to structure and triage the bailouts that have to be done.
Doing this, along with other tools such as waiving threshold requirements and fully funding unemployment insurance, food stamps and Medicaid along with SBA loans and guarantees, will address the immediate human crisis as well as slow the economic and financial crisis. Once payroll is being covered, policymakers can triage to figure out which companies need aid, how much they need and what terms and conditions make the most sense. Remember, these companies do not need massive bailouts; they only need to be put in hibernation to survive the temporary winter-like state caused by the pandemic.
Responsible public officials have to hope for the best, but plan for the worst. We need a Plan B now.
Dennis Kelleher is the president and CEO of Better Markets, an organization that advocates for enhanced financial regulation and oversight.