Congress is currently hammering out a deal to cushion the blow to the U.S. economy from the coronavirus — a package variously referred to as a stimulus, a “bailout,” or an aid package. Lawmakers must act fast, but they must also be smart about what they do.
Currently, some very bad ideas are being considered, and so, we write to offer words of warning.
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First, we strongly encourage Congress not to approach this situation as if it were providing a stimulus. Economic stimulus in this environment is a fool’s errand. This is not 2009. The coronavirus has not sapped the economy’s liquidity but rather forced a halt to much of its production. Businesses have been forced to close not for lack of custom, but for risk of infection. And so to inject more money into the economy while actively forbidding millions of people from producing anything or spending that money is pointless at best.
In other words, an Andrew Yang-style universal income payment is absolutely the last thing Congress should be considering. And monetary stimulus by the Federal Reserve Bank will simply be ineffective.
Instead, Congress should try to provide aid to those directly affected. And where possible, it should use existing government infrastructure.
The first task for Congress is to help the workers who have been idled by the threat of infection. With the cooperation of the states, this can be done through a temporary enhancement of the existing unemployment insurance system.
Typically, Congress responds to recessions by extending the period for unemployment benefits. In this case, Congress should do the opposite. It should expedite and increase benefit payments above the norm, but for a short period — six weeks, give or take. For the same temporary period, lawmakers should also expand eligibility to cover all applicants (applying online, obviously) who can credibly claim to have been idled due to the coronavirus, waiving any requirement that they seek a new job while receiving the benefits. Those who lose their jobs permanently could file paperwork to transition seamlessly onto the regular unemployment rolls after the quarantine period ends.
Unemployment benefits sometimes get a bad rap among conservatives. But this is a unique situation in which policymakers want to encourage temporary idleness so as to prevent infection. What better way to accomplish this than by temporarily subsidizing idleness?
Meanwhile, this approach will guarantee that aid quickly reaches those who need it most — workers forced into idleness, who must still pay their rent and utility bills and put food on their tables during the quarantine period.
Having thus provided for idled employees, Congress will face the additional problem of reparations for businesses, large and small, that have been forced to close by government mandates or the requirements of social decency. Such businesses are already getting some relief in the form of reduced labor costs as they cancel employees’ shifts. But that’s not going to be enough if they are to survive the pandemic so that their employees can return afterward.
Fortunately, with businesses’ required quarterly tax payments coming up next month, the timing is perfect for a one-time tax rebate that will help them survive.
Business owners with at least one affected full-time equivalent employee should be given two options: a modest lump sum reduction in their April payment, or else, a prorated amount based on two months’ average profit over a longer period. This will provide options for small and large businesses alike, with the first option intended specifically to help the full-time self-employed.
To be sure, some people will try to abuse such a system, just as some people cheat on their taxes and defraud the unemployment system as it currently exists. But Congress can impose special penalties to reflect the desperation of the current situation.
Congress can and should take action to help prevent this freak occurrence from derailing an otherwise healthy economy. What’s needed right now is not a fiscal stimulus, but a month of financial stability for a large group of people trying to cope with a modern plague.
Government can provide that stability right now with a targeted, temporary subsidy for those idled by the threat of infection.
