The Nation - 06.04.2020

April 6, 2020 The Nation. 5

THE SCORE/BRYCE COVERT + MIKE KONCZAL

Healing the Economy

T

he coronavirus is spreading

across our economy every bit as

much as it is spreading across

our communities. As businesses

shutter and travel bans go into

effect, a recession is almost certain. To lessen

the crash and its very real human impact, Dem-

ocrats in Congress must take immediate action.

There are three essential aspects to the stimu-

lus 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.

Each of these would help address the

threat that hangs over the economy: that we

will repeat the mistakes of the Great Reces-

sion. That recession started in December 2007

and technically ended after two years—but

13 years later, we still aren’t sure if unemploy-

ment is as low as it would have been had we

taken stronger action. We failed in our re-

sponse then, and in our era of continued low

interest rates and weak corporate investment,

we could be setting ourselves up to fail in

exactly the same way again.

The first way to avoid past errors is to

make sure any spending package is big

enough to address the scale of the coming

downturn. Issuing $2,000 checks to every

American would cost upwards of 3 percent of

GDP and would be enough to start pushing

back a recession. It would also be equitable,

reaching all people, unlike a payroll tax cut,

which would disproportionately benefit those

at the top of the income distribution. The

Federal Reserve has acted more quickly this

time, lowering interest rates and beginning

a purchasing program. To take advantage of

these low rates and boost the economy, we

also need a major spending package—for

example, an infrastructure project designed

to mitigate carbon emissions and fossil fuel

use—on the order of an additional 4 percent

of GDP. Interest rates are projected to be low

for many years, and the economic boost from

this investment will be necessary to invigorate

what is certain to be a slow recovery.

The second way to avoid our previous

blunders is to make sure the spending au-

tomatically renews itself if the recession

continues. Economists like Claudia Sahm of

the Washington Center for Equitable Growth

have proposed ways to automatically send

money to people once certain thresholds

that predict recessions have been met and to

continue those payments until the recession

is over. This would help solve the problem of

doing too little.

But there’s also a political dimension:

Democrats in 2009 designed their response

assuming that they could go back and do

more later. In the end, this option wasn’t

available, even as it became clear that the

recession was far worse and

more prolonged than originally

understood. There’s a reasonable

chance that a Democrat will take

the White House next year with

Republicans still in control of

the Senate—and if a recession is

ongoing, it’s important that any fiscal stimulus

won’t be held hostage by them, as was the

case in 2011, when unemployment was over

9 percent. And even if Democrats control

both houses of Congress, they won’t want to

squander months simply reenacting the mea-

sures they agreed to the year before.

Third, the stimulus package should ensure

that temporary programs are executed in a

way that lets them easily become permanent.

Much of the response to the Great Recession

was designed to be hidden from everyday

people, but even more than last time, we can’t

just enact a fiscal spending package. The

corona virus crisis has exposed how little secu-

rity we provide to workers. The fissuring of the

workplace, where many full-time employees

have been replaced by independent contrac-

tors, has shifted risk to individuals instead

of being managed through social insurance.

Democrats should demand permanent paid

sick leave and a broader set of protections for

all workers. But these should be structured so

the programs can endure after the recession

is over. This is a real trade-off, as the pressure

will be to do something quick and easy rather

than something better and more permanent.

Many mistakes will be made in the months

ahead. But the greatest one would be to

repeat our errors, hoping something will be

different this time. The most important lesson

from the Great Recession is that the serious

risk is in doing too little, not in doing too

much. To meet the challenges of protecting

ourselves and our economy from the corona-

virus, we must expand social insurance and

full employment investment policies—the

proven remedies for economic ills in times

like these. Mike Konczal

The greatest mistake would be to

repeat our errors, hoping some-

thing will be different this time.

A National

Response to the

Coronavirus

2020 infographic Tracy Matsue Loeffelholz

And stick with it.

Automatically renew spending

if unemployment slips above 4%

The Great Recession

taught us that the

greatest danger is in the

government doing too

little, not too much.

3

(^1) Start to stabilize
the economy with
one-time payouts.
$2,000 checks for every adult,
plus $1,000 per child
2 Unleash a bold stimulus
package.
$870 billion
or 4% of GDP
in new spending starting this year