The coronavirus pandemic has brutally affected the US economy. The loss of jobs as a result of the health crisis wiped out years of profits and hit women, people of color, and poorly paid workers who are already vulnerable to economic fluctuations hardest. An estimated 60 percent of businesses – around 100,000 sole proprietorships – that have temporarily closed their doors due to Covid-19 have closed permanently, and more may follow in the coming months.
It will be a bleak winter for many companies. And while there is hope in the form of vaccines, the toll is expected to get worse before it gets better.
Given the limited number of starting doses and the growing number of cases in the US, “the reality is that December, January and February will be tough times,” said Dr. Robert Redfield of the Centers for Disease Control and Prevention recently. “Indeed, I believe they will be the most difficult time in this nation’s public health history.” That means the economy will suffer as well.
As part of the DealBook DC Policy Project, the New York Times convened a virtual expert group in early December to discuss economic policy priorities for the months and years ahead. The consensus was that a huge aid package is now needed to keep households and businesses alive. In Washington, lawmakers said they were making “significant headway” on the stimulus talks, but the negotiations had not yet produced an agreement of any size. And once the pandemic is brought under control and personal activities can resume, policymakers need to figure out how to fix a ruined economy – and better yet, to protect it from the next disaster.
The United States needs an aid package right now, and it has to be big. Very large.
The panel agreed that the United States should spend a lot of money now to prop up the economy before a critical mass of the population had a chance to get vaccinated against the coronavirus. Wendy Edelberg, Senior Fellow at the Brookings Institution and former Chief Economist of the Congressional Budget Office, explained the $ 2 trillion spending: “If we really wanted to get it right”:
“Given how multipliers work, the low propensity to consume work, and the way all of this affects the economy, the package is about as big as you need it to be. Given the risk that this could be too big and the economy get too hot, I am not worried about the scope of our tools to deal with this. “
Be prepared for the first quarter of next year to be bad. Really bad.
The emergence of promising vaccines means many Americans will continue to crouch, knowing the end of the pandemic is in sight. Local officials can also put lockdowns in place to keep hospitals from being overwhelmed over the winter. This could mean a collapse in economic activity in the first quarter of 2021, in line with the initial lockdowns in the first few months of the pandemic.
Economist Kevin Hassett, who chaired the White House Council of Economic Advisers from 2017 to 2019, explained what lies ahead:
“We’ll have another crater, like we did in the second quarter. It’s getting very serious. And we have to build some kind of bridge to the other side of it. And my guess is that you shouldn’t expect Congress to move because people have to be ratified by March or so. So what you need to do is get a package big enough to get us into March and simple enough for them to get it done quickly in the Lame Duck session. “
There will come a time to worry about national debt again. That time is not now.
Maya MacGuineas heads an organization called Campaign to Fix the Debt, which is dedicated to the thesis that “America’s growing national debt is a deep threat to our economic future.” But even she says that now is not the time to worry about borrowing.
“Responsible finance borrows like crazy right now,” said Ms. MacGuineas. There will come a time, she said, to reevaluate the compromises. In the meantime, there is time to spend, but note that at some point a pivot point will be required:
“No matter which party is in power, it’s nice to be able to get your agenda implemented without having to pay for it. We saw that in the four years before this downturn, and I am concerned that there will be many voices saying we shouldn’t pay for things later. But I think responsible finance borrows like crazy right now. Things that are purposeful, things that are smart to make the economy stronger. But once we stabilize the economy, you should be ready to reduce this debt so that it doesn’t grow faster than the economy. “
The urgency of economic aid cannot be an excuse for programs that exacerbate inequality.
Several experts on the panel expressed frustration that initial government aid was inadequately used and smaller amounts of money were distributed more diffusely, rather than focusing on the households and businesses most affected by pandemic standstills. Now there is a danger that in the rush to get money out the door, the same mistakes can happen again.
One of the risks of rushed decision-making is that aid will worsen inequality and put disadvantaged communities at greater risk, said Heather Higginbottom of JPMorgan Chase’s Policy Center, who previously held positions in the State Department and the Bureau of Administration and Budget under President Barack Obama :
“I think you hear some of the frustration: ‘Why has nothing been done?’ Because you have much better policy when you have the conscious opportunity to actually resolve some of these problems than when you potentially force something into a lame duck. “
Darrick Hamilton of the New School set out some overlooked but crucial mechanisms for promoting greater justice that should be considered and may not have been in the first round of incentives. For example, black-owned companies could not easily receive aid even though they were eligible. And then, getting back to the debt issue, he said policymakers should consider canceling some types of household debt that could hang over people long after the pandemic ended:
“We’re kicking the ball out on evictions and foreclosures, which is the right thing to do to impose eviction moratoriums. But there are still many people who are far underwater. I think we need to think about forgiveness with debt in different ways. Student debt, of course, but in a creative way of addressing the fact that if we open up, you will have some people who will be way below and way behind. “
After the pandemic, it will not legally continue as usual.
Suzanne Clark of the Chamber of Commerce noted that companies were concerned about health liability when they opened and also after the pandemic ended. That could affect growth, she said:
“We keep hearing from small businesses who are really concerned about liability. And there is a precedent that we did after 9/11 where there can be very targeted, very temporary, very targeted liability protection for companies that open up to public health under the current guidelines and do whatever it takes to help Maintain people’s health. I’m not talking about bad actors, I’m talking about people who really do everything we know right now to keep people healthy and open their doors. They really worry that if they are sued about it, they will wake up at the end of the day and have this very different reason to go bankrupt. “
Invest in infrastructure to stimulate the economy and bring a divided nation back together.
The pandemic exposed the places where America’s technological infrastructure had become worn out and thin, from communities lacking the broadband access needed to work and study online to systems of government collapsing under the demand for virus testing. Investing in infrastructure has long been a mutually supportive issue, providing the opportunity to directly employ people while improving communities.
“At a time when there is no agreement on common things, I would start there,” said Félix V. Matos Rodríguez of the City University of New York. He presented a vision for infrastructure spending that was endorsed by his peer experts, and linked many of the issues raised during the discussion:
“It has the benefit of addressing a lot of the issues we are discussing here – in the way that you can do that for additional equality of wealth and the like. There are the obvious things that everyone mentions when they think of infrastructure, namely roads, tunnels and the like. I think you need to add our IT infrastructure, which we saw in the pandemic, how dependent we are on it and how these gaps really haunt us, for the business community, for the educational community, for all areas of society and the economy. “