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ILLUSTRATION


BY


JACK


TAYLOR


existingfiscal-supportmeasures.Forinstance,insteadofthe
forgivableloansofthePaycheckProtectionProgram,itfavors
loan subsidies. This kind of support is better targeted at com-
panies that will be viable and capable of expanding as the
recovery advances, vs. those that are likely to fail regardless.
The scheme shouldn’t rule out other additions to public
spending, least of all investments that would pay for them-
selves, such as funding for infrastructure and clean energy.
And it shouldn’t sideline broader fiscal reform, including the
need for a fairer system of taxes and entitlements and a plan
for securing long-term budgetary control. For the moment,
though, an effective response to the pandemic must come
first. That means supporting demand, boosting employment,
and protecting the most vulnerable from economic harm.
If the existing instruments for achieving those goals can be
made more powerful at the same time, so much the better. <BW>
For more commentary, go to bloomberg.com/opinion

◼ BLOOMBERG OPINION


Sofar,theU.S.economicpolicyresponsetothecoronavirus
crisishasbeenimpressive.NobodycouldaccuseCongress
andtheFederalReserveofbeingtimidaboutsupportingout-
putandemployment.
Evenso,theirworkis justgettingstarted.Therecoveryis
underway,butit followsanextraordinarilydeepdecline.If
allgoeswellfromhere—abigif—itwilltakemonthsandmaybe
yearstogetbackontrack.Meanwhile,severaloftheemer-
gencybudgetmeasuresincludedintherecentCaresActand
otherpandemiclegislationwillsoonexpire.Theeconomy
needsa newroundoffiscalsupport.
Indesigningthenextpackage,Congresswouldbewiseto
leanheavilyontheplanadvancedrecentlybyJasonFurman,
TimothyGeithner,GlennHubbard,andMelissaKearney—
distinguishedeconomistsandformerpolicymakersfromboth
parties.Theirproposalnotonlymeetstheneedsofthemoment
byextendingsupportwhererequired,butit alsoredesignssev-
eralofthemaininstrumentsoffiscalstimulussothey’llwork
moreeffectivelybothnowandinfuturerecessions.
Theplan includes extendedincome support forthe
unemployedandunderemployed,newtemporarysubsidies
forlow-wageworkers,cheaploansforsmallandmedium-size
businesses,andadditionalsupportforstateandlocalgovern-
ments.Theeventualcostisn’tcertain.It mightrangefrom
$1trillionto$2trillion,saytheauthors,dependingonthe
speedofrecovery.Butthiselasticityis a goodthing.Settling
ona numberforadditionalspendingregardlessofhowthings
workoutmakeslittlesense,becausetheslowertherecovery,
themoresupportwillbeneeded.It’sbettertospecifythepoli-
ciesandletconditionsdictatetheoutlay.
TheCaresActsupplementedexistingunemployment
insuranceprogramswithseveralmeasures,includinganextra
paymentof$600a weekforthoseoutofwork.That’soneof
theprovisionsduetoexpireinJuly.Furmanandcolleagues
proposetoextendtheextrasupportbutintheformofan
addition to state unemployment benefits that’s capped at 40%
of covered wages up to a maximum of $400 a week. The idea
is to replace, in all, about 80% to 90% of lost wages for work-
ers who were making the median wage or less. This avoids the
financial penalty that the flat $600, if renewed, would impose
on low-wage workers returning to their jobs.
In addition, the plan would permanently link federal sup-
port for extended unemployment insurance to state jobless
rates. That way, workers in areas with high unemployment
get more help, and the additional support phases out auto-
matically as more people get back to work.
The plan both extends and modifies other aspects of the

What the Next U.S.


Economic Stimulus


Should Look Like


Germany takes over the presidency of the council of
the European Union on July 1 for six months, giving the
region’s biggest economy a mandate to shape a concerted
recovery effort from the coronavirus pandemic.

▶ Steering Through Tumultuous Times


◼ AGENDA


▶ China reports
second-quarter GDP
figures on July 15.
The economy has
begun to mend as the
coronavirus retreats, but
infections have flared up
again in Beijing.

▶ The Reserve Bank
of Australia unveils its
interest rate decision
on July 7. Borrowing
costs stand at 0.25%;
the bank has said it will
likely maintain current
levels for years.

▶ Brazil’s Banco BTG
Pactual, the investment
bank controlled by
billionaire André
Esteves, will price its
planned share sale on
June 29.

▶ Daimler holds its
annual general meeting
on July 8. Investors at
the virtual gathering
will grill management
on last year’s multiple
profit warnings and the
outlook for 2020.

▶ Ralph Hamers packs
up his bags at Dutch
lender ING at the end
of June and moves to
Zurich, where he’s due
to take over at UBS
later this year from
CEO Sergio Ermotti.

▶ A June 30 deadline
looms for negotiators
from London and
Brussels to decide
whether to prolong the
post-Brexit transition
period by one or
two years.

June 29, 2020