Bloomberg Businessweek - USA (2020-06-29)

5

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