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How to get the economy going and when to worry about all that debt

The coronavirus pandemic has wreaked havoc on the US economy. Job losses resulting from the health crisis have wiped out years of gains, hitting women, people of color and lower-paid workers hardest, already vulnerable to economic fluctuations. It is estimated that 60% of the businesses – around 100,000 individual establishments – that have temporarily closed their doors as a result of Covid-19 have closed their doors for good, with more to follow in the months to come.

It will be a dark winter for many companies. And while hope looms on the horizon in the form of vaccines, the toll is likely to worsen before it improves.

Given the limited number of initial doses and the increase in the number of cases in the United States, “the reality is that December, January and February are going to be difficult times,” said Dr. Robert Redfield of the Centers for Disease Control recently. and Prevention. “I actually believe this will be the most difficult time in the history of public health in this country.” This means that the economy will suffer as well.

As part of the DealBook DC Policy Project, the New York Times convened a virtual panel of experts in early December to discuss economic policy priorities in the months and years to come. The consensus was that a huge aid package is now needed to keep households and businesses afloat. In Washington, lawmakers said they were making “significant progress” on stimulus talks, but negotiations had yet to reach a deal of any magnitude. And once the pandemic has been brought under control and in-person activities can safely resume, policymakers must figure out how to fix a crumbling economy – and better yet, protect it from the next disaster.

The participants:


The United States needs an aid package now, and it has to be big. Really big.

The panel agreed that the United States would now have to spend a lot to support the economy before a critical mass of the population has a chance to be vaccinated against the coronavirus. Wendy Edelberg, senior researcher at the Brookings Institution and former chief economist at the Congressional Budget Office, made the case for spending in the order of $ 2 trillion, “if we really wanted to do it right”:

“Considering how multipliers work, marginal propensities to consume labor and how it all turns into an economy, this is about the size of the package you need. Now, given the risk of this being too big and causing the economy to spin too quickly, I’m not worried about the extent of our tools to deal with it.

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 curl up knowing that the end of the pandemic is in sight. Local authorities can also put in place lockdowns to prevent hospitals from being overwhelmed during the winter. That could mean a collapse in economic activity in the first quarter of 2021, on par with the initial lockdowns in the early months of the pandemic.

Economist Kevin Hassett, who served as Chairman of the White House Council of Economic Advisers from 2017 to 2019, explained what lies ahead:

“We’re about to have a crater, again, much like we had in the second quarter. It will be very serious. And we kind of have to get to the other side of it. And I guess you shouldn’t expect Congress to be able to move, because it’s going to have to be confirmed before March or so. So what you need to do is pack a package big enough to get us into March, and simple enough that they can do it quickly in the lame session.

There will come a time to worry about the national debt again. This time is not now.

Maya MacGuineas is the head of an organization called Campaign to Fix the Debt, which is dedicated to the thesis that “America’s growing national debt deeply threatens our economic future.” But even she says now is not the time to worry about borrowing.

“Responsible fiscal policy borrows like crazy right now,” MacGuineas said. There will come a time, she said, to reassess the tradeoffs. In the meantime, it’s time to move on, but be aware that a pivot will be needed at some point:

“No matter which party is in power, it’s good to be able to implement your agenda without having to pay for it. We saw this in the four years leading up to this downturn, and I’m afraid there are many voices that we shouldn’t be paying for things later. But I think responsible fiscal policy is borrowing like crazy right now. Things that are targeted, smart things, to keep the economy going. But once we stabilize the economy, be prepared 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 worsen inequalities.

Several panelists expressed frustration that the initial government assistance was poorly targeted, distributing smaller amounts of money more diffusely rather than focusing on households and businesses that would be most affected by closures in the event of a pandemic. Now, there is a risk that in rushing to get money out, the same mistakes will happen again.

One of the risks of rushed decision-making is that aid worsens inequalities and puts disadvantaged communities at greater risk, said Heather Higginbottom of PolicyCenter at JPMorgan Chase, who previously held positions in the Department of State and Office of Management and Budget under President Barack Obama:

“I think you hear some of the frustration, ‘Why hasn’t there been action yet?’ Because you are crafting a much better policy when you have a deliberate opportunity to really resolve some of these. problems only when you force something potentially into a lame duck.

The New School’s Darrick Hamilton presented overlooked but crucial mechanisms for promoting greater equity that should be considered, and which may not have been part of the first round of stimulus. Underbanked black-owned businesses, for example, could not easily receive financial assistance, even if they were eligible. And then, returning to the topic of debt, he said policymakers should consider canceling certain types of household debt that could weigh on people long after the pandemic is over:

We are throwing the ball on the road when it comes to evictions and seizures, which is the right thing to do, to put moratoria on evictions. But there are still a lot of people who are good underwater. So I think we need to start thinking about debt forgiveness in various ways. Obviously student debt, but a creative way to deal with the fact that you’re going to have people, when we open up, that are way below and way behind.

It won’t be business as usual – legally speaking – after the pandemic.

Suzanne Clark, of the Chamber of Commerce, noted that businesses are worried about health responsibility as they open up and even after the pandemic has subsided. This could be a drag on growth, she said:

“We continue to hear from small businesses that are really concerned about liability. And there’s a precedent, we did after 9/11, where there can be very targeted, very temporary, and very targeted liability protections for businesses that are opening up, following current guidelines for disclosure. public health, doing all they can to keep people healthy. I’m not talking about bad actors, but people who are really doing everything we know how to do right now to keep people healthy and open their doors. They really worry that at the end of the day they will wake up and have some other reason to go bankrupt when they are sued for it.

To revive the economy and bring back a divided nation again, invest in infrastructure.

The pandemic has exposed places where America’s technological infrastructure has become worn and thin, from communities lacking the broadband access needed for work and online learning to government systems that have faltered under demand for testing. virus. Investing in infrastructure has long been an issue with bipartisan support and offers the potential to directly employ people while improving communities.

“At a time when agreements on common things are not abundant, I would start there,” said Félix V. Matos Rodríguez of City University of New York. He presented a vision for infrastructure spending that his fellow experts endorsed and linked many themes that were raised throughout the discussion:

“It has the benefit of touching on a lot of the topics that we’re discussing here – the way you can do it, bringing in extra wealth equality and things like that. There are some obvious things that everyone mentions when you think of infrastructure, namely roads, tunnels and things like that. I think you have to add our IT infrastructure, which in the pandemic we have seen how much we depend on it and how these gaps are really coming back to haunt us, for the business world, for the educational community, for all sectors of the world. society and economy. “

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