Some thoughts on economic disaster relief - aka fiscal stimulus (things are fluid, and I'm open to refinements!). First, we should aim for $1trn, or 5% of GDP, which is on the high end of estimates. Better to overreact now, both on this and public health mitigation measures.
1) We should send #ChecksChecksChecks to every person (including kids!) - $2000 is a rough estimate - could be $1000 per month during the national shutdown - this is about $600bn
We could have these be taxable a year later for those above a certain income level to make it more progressive, although the @gop may not go for that
2) Massively expand federal support for #UnemploymentInsurance to allow businesses to furlough workers (and save on labor expense) without feeling guilty
3) Business lending - every business in America should be able to borrow 3 months of 2018 revenue (25%) for 5 years with no interest - this will allow the demand shock to be spread evenly over a long time, letting restaurants, bars, etc. survive the crisis
4) Delay the tax filing deadline for 2020 until October 15 - this provides a little extra liquidity to people (and with rates at zero, doesn't really cost much)
5) Expand direct grants to states for Medicaid matching & fighting #COVID19 as per @jasonfurman wsj.com/articles/the-c…
The mix of 2-5 should cost around $400bn more - as for the business loans, let's assume 20% will be lost, so we could lend about $1trn (again - 3 months of revenue) in this program
These programs will all augment our public health response - the more severe our mitigation measures, the more severe their economic impact - this disaster relief will smooth out the shock, allowing individuals and businesses to survive the storm.
If others have good suggestions, please keep them coming - it is hard to put together a comprehensive package in a matter of days (weeks), but it is urgent we do so. #ExtremeAutomaticStabilizers help us manage the costs of #ExtremeSocialDistancing
By the way, if @MittRomney and @TomCottonAR agree with many of these, it should be easy to get a bill done! medium.com/@SenTomCotton/…
Option #4 - payroll tax relief to incentivize small firms to keep people working - is another great idea from @JayCShambaugh brookings.edu/blog/up-front/…
"Many of these businesses would be otherwise viable, taken out not because of bad decisions but because of a once-in-a-century pandemic that’s difficult to hedge against" @SHamiltonian @stanveuger thebulwark.com/a-recession-is…
I think this (above) is a key insight - there are no moral hazard issues here - there are MANY businesses we want to survive, which might not, through no fault of their own - it is unconscionable to let them fail - both morally and economically
The mechanisms need improving, but the amount isn’t too far off. Let’s have a “yes and” type of negotiation washingtonpost.com/us-policy/2020…
“Treasury should heavily subsidise loans to businesses with fewer than 500 employees, and said that companies should get a wage subsidy for keeping workers on their staff.” @AdamPosen ft.com/content/43a430…
.@AdamPosen what’s the best way to get these loans out ASAP? Who should administer it and by what mechanism?
