What’s The Best Way To Boost The Economy In A Pandemic?
Tuesday, March 24, 2020
This is a rush transcript and may contain errors. It will be updated.
Greg Wilpert: It’s the Real News Network. I’m Greg Wilpert in Arlington, Virginia. As we record this on Monday, Republicans and Democrats are deadlocked in Congress over a $1.8 trillion stimulus package to combat the economic fallout from the coronavirus pandemic. Reports indicate that the plan includes $500 billion in bailout money for companies that could go out of business because of the economic downturn. Also, it includes one time cash payments of $1200 for every adult US resident earning less than $100000 plus $500 per child. A vote to pass the stimulus package failed in the Senate late Sunday 47 to 47 along party lines. Five Republican senators did not participate because they are in quarantine. 60 votes are needed though for the budget measure to pass. Democrats are opposed to how the stimulus package fails to provide sufficient unemployment aid and that the business bailout portion of the plan includes no protections for workers and little to no oversight. Here’s what Senator Elizabeth Warren had to say about the plan.
Sen. Elizabeth …: We don’t have enough details from the Republicans, but in our caucus there is great unhappiness with how they’re trying to advance a proposal that would be great for giant corporations and leave everyone else behind. We’re not here to create a slush fund for Donald Trump and his family or a slush fund for the Treasury Department to be able to hand out to their friends. We’re here to help workers. We’re here to help hospitals. And right now what the Republicans have proposed does neither of those.
Greg Wilpert: Some Democrats have expressed skepticism about the cash payments arguing that more targeted aid would be more effective. Many Progressive’s though support expanding the cash payments portion. For example, Congresswoman Rashida Tlaib of Michigan has introduced a bill that would provide a onetime cash payment of $2000 to every US resident plus $1000 per month until a year after the economy recovers.
Joining me now to discuss the stimulus plan and the different proposals are Doug Henwood and Jeff Hauser. Doug edits the Left Business Observer and as host of the radio program Behind the News. And Jeff is the founder and executive director of the Revolving Door Project at the Center for Economic and Policy Research. Thanks Doug and Jeff for joining us today.
Jeff Hauser: Thanks for having us.
Doug Henwood: Thanks for having me.
Greg Wilpert: There are several issues that I would like to explore with the two of you. There’s a lot of course that we could go over, but I just want to limit it because we don’t have that much time. So first of all, as I mentioned, there’s the issue of cash payments. Now, Bernie Sanders, Alexandria Ocasio Cortez, and Rashida Tlaib have all come out with proposals to expand the Republican plan to issue one time cash payments. Some people, however, have argued that cash payments make little to no sense at the moment. So let’s start with you Jeff, what do you think about this idea of cash payments?
Doug Henwood: I think cash payments are less urgent than targeted aid in the sense of supporting hospitals and first responders and other people who are providing urgent services, caring for the shelter needs of our homeless populations amidst the pandemic, making sure that food gets to the people who need it. It’s not quite as urgent, but it’s going to be needed on a very expedited basis. And I believe we should be in a both and approach to most of the degree to which we are in the hole is hard to overstate. And so we should not say, well, we need to focus on healthcare system versus protecting the income of Americans. We should try to do both. We should provide immediate short term payments when we can, but we should not do so before we take care of healthcare. We should take care of the imminent needs as quickly as possible, but we should be aware that this spending is going to go to levels that has never gone with and it should. So we just need action quicker, but we should not, therefore, accede to corporate bailouts like the Republicans are proposing.
Greg Wilpert: Doug, I want to get your thoughts on this, but I also want to add that in other programs here on The Real News we’ve had economists such as Bill Sprigs of the AFL-CIO say that cash payments would actually be relatively ineffective because this is a downturn where people are basically, the reason that people are not spending money is mainly because they’re forced to be at home. So they’ll just be spending more money on things that they don’t necessarily need and that it won’t benefit the businesses that are in crisis such as tourism or the restaurants and hotels and those kinds of things. So what’s your thoughts on this, on the need for a cash benefit program?
Doug Henwood: I think the cash benefit is important. I think there are often a lot of people who are going to be completely broke, won’t be able to pay the rent, other basic expenses of life. And a $2000 doesn’t go very far, but it’s certainly a lot further than zero. And the targeted argument, I understand that people want to focus on the people most in need, but I’m not sure we have the machinery to do that properly in a short period of time, the kind of timescale we need to operate on to get money to people who are really desperate now. Also, I want to address the fact that the economic problem now is not a financial crisis so much is the fact that people can’t go to work. So the whole productive sector at this point is broken. But on the other hand people do need some cash to pay for food, pay the rent and to pay the utilities. It would be nice to have some rent moratoriums, foreclosure moratoriums. But no, we’re not having those just yet. So, and I think it’s important to get cash to people.
The business bailouts, certainly there has to be conditions on them. And the same with the financial bailouts. I’m really concerned that the Republicans just want to give a blank check. Bernie Sanders on his live stream last night was talking about $500 million for the candy industry. We don’t need that sort of thing. We need do need protection for workers, but we also need to think about some of these industries. Do we really need a cruise ship industry at this point? This is the most environmentally destructive thing you can imagine. We should think also about the airlines. Can we go back to this world of endless flying that existed before all this? We need to think about those kinds of things over the longer term as well.
But obviously some targeted assistance to businesses are important. The British approach of paying, subsidizing something like 80% of payroll, although there are a lot of holes in it that’s also a possibility to think about.
But yeah, I think the cash payments are really urgent to get to people and then certain business bailouts but not the blank check unconditional stuff that Mitch McConnell would love.
Greg Wilpert: Well I want to return to the issue of the bailouts in a moment, but before we go I want to ask a question about the targeted aid. The debate over universal cash payments versus targeted aid to the unemployed particularly and also to the medical sector seems to revolve around questions of effectiveness versus efficiency. That is universal cash aid seems to be more efficient in that the government can send it right away to everyone without conducting a means test. But then as I mentioned, some critics say that it’s too generalized and won’t help those who need it most. On the other hand, expanding unemployment aid is more targeted. It’s less efficient because it does involve means testing to see who really needs the aid and so in other words it’s going to take longer perhaps to get it to people.
So Jeff, I want to get back to you on this. What are, what do you think? I mean in terms of the targeted aid, I mean do you think that this is something that could be done as quickly as the cash payments? What are your thoughts on that?
Jeff Hauser: I’m not sure if it can happen as fast as expansion of the UI system, which we have in place and we have a lot of infrastructure in place to maximize things like UI quickly.
Greg Wilpert: You mean unemployment insurance.
Jeff Hauser: I think [crosstalk 00:07:53] things like WIC and other targeted food programs. And obviously we need to rapidly expand the capability of state and local governments to assist the homeless and other, and obviously public health, first and foremost. So we should expand dramatically the targeted programs that already exist. But we also, there’s no reason why we can’t do that and also look into universal basic income style ideas in the short and medium run of the sort that Rashida Tlaib and others are discussing right now. Those make a lot of sense. We don’t need to connect the two necessarily in the same bill.
The next bill that passes Congress is not going to be the final element of the coronavirus response by this Congress. So I would urge both targeted programs as essentially the largest volumes that we can push through existing programs as quickly as possible while also hastening to deploy universal basic income as quickly as possible. I advocate for a both and approach because I think the scale of the problem is tremendous. And we actually want to radically reduce economic activity while keeping people as safe, as sheltered, as fed and with as much healthcare as possible. And that is a very weird thing to be doing at the same time and that’s why we need both targeted aid to make sure that people are okay for their short run needs and we also need the universal basic income measures in order to keep people home because that is what’s going to keep us safe as a society or as safe as we’re capable of.
Greg Wilpert: Doug, you both seem to agree pretty much on this both and approach, but I just want to push back a little bit more again than on the issue of the cash payments. That is, I mean, if everybody, I mean, what benefit would it be for somebody who is already making a decent income and is able to work from home, let’s say, to receive a cash benefit versus if that money couldn’t be used instead for targeting and towards other areas that are in badly in need. What do you?
Doug Henwood: Well first of all, I just want to make a point about the unemployment insurance system. It only covers about two thirds of people who’ve lost their jobs. There are big holes in it. States have tightened eligibility and duration over the last several years, especially in the wake of the great recession. So that there’s some real serious holes in the unemployment insurance system that we would have to fix and that would take some time. And I’m sure there are a lot of states that wouldn’t want to play along with that.
But on the question of people getting money that don’t deserve it, we can always tax it away next year on it. It’s not like this money’s going to be gone forever. But I think the advantage of getting it out quickly and that sense of a boost of confidence that you’re getting a check in the mail, it’s very important and comforting to a lot of people.
And Warren Buffet doesn’t need his $2000, but it’s going to take a long time to find out who the lawyers are, who the Warren Buffets are. And we don’t really have that time right now. So I think just getting it out is urgent, but all the other things are extremely important. Expanding unemployment insurance system, making sure that people have healthcare coverage, we need expansions of Medicaid. And again, we’re going to have trouble with some of those states over that. But yeah, there’s a whole lot of things that need to be done. Targeted aid for industries, aid to the first responders. Also state and local governments are going to be really hitting a big fiscal hole or the federal government is the only entity that can do anything about that at this point. So yeah, there’s a whole lot of things that have to be done. It’s beyond both and, it’s many and have to be done.
Greg Wilpert: I want to turn now to the issue that of bailouts, which you’re actually already started talking about Doug, but as we saw earlier, this has been a major stumbling block with Democrats who are saying that the bailouts for companies should be tied to a number of conditions such as limits on layoffs, on CEO pay, on stock buybacks among other provisions. Now, Jeff, you and your colleagues at CEPR, Dean Baker and Eileen Applebaum, presented a series of proposals for an economic rescue program, but I don’t think it included any bailout money for companies. What do you think of the idea of providing bailout money?
Jeff Hauser: I think it is difficult to administer in a completely fair way. That isn’t to say none of it should happen, but I think it will take a little bit of time and it’s better to try to do bridge activities. I would like to believe the Federal Reserve can be helpful in this regard. There are some reasons to believe that their programs have not been as fair to small and medium sized business as to large businesses. Some of that include, based off of their past experiences, some of it is their bias as the Federal Reserve is made up of individuals who are accustomed to dealing with the largest businesses. I don’t think we should rush a mechanism through given the current existence of bankruptcy laws and also the ability to experiment with laws as in the United Kingdom that Doug was referencing to try to keep workers connected to employers through subsidizing wages. I’m wary to rush to bailouts when there are other policy tools that we have. And bailouts that are rushed are likely to have fewer conditions and be less well suited to the actual need of keeping workers connected to employers as long as possible.
Greg Wilpert: Yeah, I think that’s an interesting idea actually. That’s also something that they apply in Germany, which is known there as a short work where basically the number of hours that people work is reduced and then the government subsidizes the lost income to a certain percentage. I think it’s around 60 to 70%. So they don’t make their full income, but they almost do even if their work hours are reduced by half. What do you think Doug? Is that the better way to go? You mentioned earlier the importance that some industries ought to receive bailouts. What do you think?
Doug Henwood: Yeah, I think the wage subsidy idea is a good one. I know this, it’s painful for me to endorse subsidizing capitalists to do their work, but you know like these are urgent times and you can’t be too picky I guess. But we also have to worry about entire industries disappearing and the restaurant sector. It’s going to be … What’s going to happen in several months if we’re ever allowed out of our houses again? Will there be any restaurants left besides McDonald’s? That may be a quality of life issue more than an economic issue, but they’re, what, 2012, I think, million people work in the restaurant sector. If that just disappears, that’s going to be dire. A real dire transition. A whole lot of smaller retail establishments are going to get hammered. So we need to think about some ways of preserving these entities for the next several months so they just don’t dry up and blow away. I don’t know off the top of my head exactly how to structure that, but we need to think about the kinds of damage that’s going to be done to entire sectors of the economy. And people who’ve been working in the restaurants for all these years, where else they going to go? It’s not like, oh your skills are all completely transferable to other places. So we need to think about what kind of economy we want when this is all over.
But the idea that they should be done without conditions is insane. I mean that’s what, of course the funders, the Republican party would like very much, but we do need to preserve payrolls, preserve worker rights, and make sure that they don’t waste money on five or six trillion dollars in stock buybacks over the last decade just up in smoke. I mean this is a very, this is a corporate America left. It’s all very exposed to this kind of shock, heavy borrowing, use of a lot of the money just buying back stock, not investing or hiring, we’re doing R and D. So there’s going to be an awful lot of corporate bankruptcy coming up because of this high debt levels and we have to be prepared for that. Entire companies, entire sectors are going to be disappearing soon.
Greg Wilpert: Yeah. That’s actually something interesting that I was reading also someplace that corporate debt is higher now than it was back in 2008 just before the great financial crisis.
Doug Henwood: Oh yeah. It’s the highest in history relative to GDP. Yeah.
Greg Wilpert: Yeah. And so that will definitely mean something if companies don’t, aren’t able to make their interest payments, then they’re of course, can they go bankrupt, which is the definition of bankruptcy. But I would just want to give you guys, both of you, an opportunity to summarize. What do you think briefly are the main elements that ought to be in this economic stimulus plan that is being debated right now in Congress? Let me start with you again, Jeff.
Jeff Hauser: State and local aid is urgently needed and is wildly insufficient in the McConnell/Trump plan. State and local governments are literally on the front lines of this dilemma. They don’t have the ability to print money unlike the federal government. Their sales and income tax revenue, but especially their sales tax revenue, we hope their sales tax revenue is culminating at the moment. That is in fact our goal. So we should be shoveling money to them so that they’re first responders, so they’re programs to help support the homeless, public health. We need money there ASAP. And in fact if it’s necessary to take that and unemployment insurance and move that through much more quickly than we figure out the macro economic and labor market aid, I think that would be fine. I think we need money sooner rather than later to deal with the immediate crisis, which is to keep people in their homes, fed, safe and not getting each other sick. That is our most urgent goal. And I think the desire to rush the macro economic response and keep it connected to aid, to hospitals, state and local governments and the like is just ridiculous and it is a mechanism by which corporate America hopes to get unfettered aid under an urgency that they don’t really have at the moment, especially given the existence of Chapter 11 bankruptcy, which is just an important backdrop to this conversation.
But then I think we need to move very quickly to a large macro economic response that is concerned with efficiency, but is also just broadly concerned with keeping up confidence in the economy and keeping as many workers connected to businesses as possible. Businesses that are better suited to Chapter 11 bankruptcy like airlines, we should be less sensitive to their shareholders and their current executives. Then in the case of restaurants, which as Doug mentioned, it’s not really the fault of a small restaurateur that they don’t have pandemic insurance and that they, it’s very unlikely many restaurants have been doing stock buybacks. So I think we, over time, can come up with an efficient and fair and just macro economic response, but we need to get that aid out to state and local governments and to hospitals ASAP.
Greg Wilpert: And Doug, what do you think are the top priorities at this moment?
Doug Henwood: Well, I agree with a lot of what Jeff said. I think it gets aiding state and local government is extremely important at this point, especially in a, given how AWOL the federal government has been in a lot of this. So the states in particular are doing an awful lot of the work of mobilizing an emergency response. And I also, I put a higher priority on the $2000 payments. I think that’d be really a good thing for most people. And I kind of said we could tax it away if there are any efficiencies involved, inefficiencies evolve next year.
But I think also this, oh wait, not even thinking about the kind of psychological damage this is all going to do. What’s this going to do to us as people as we emerge from this? I don’t know. I mean there’s going to be some kind of really very serious readjustment problems if we ever emerge from this. And we need to start thinking about that because there’s just going to be, there’s just so much loneliness and anxiety. It’s going to eat away at a lot of us. It’s a very difficult period and aside from all the economic emergencies that have to be mobilized around, there’s also this psychological, our health as a society is really going to be a very serious issue after this and we need to start thinking about that too.
Greg Wilpert: Yeah, and that’s a very interesting point. Unfortunately we’re going to have to leave it there for now. I was speaking to Doug Henwood, editor of the Left Business Observer and Jeff Hauser, founder and executive director of the Revolving Door Project at the Center for Economic and Policy Research. Also, both of them have presented plans that are in more detail than we could discuss today and we’re going to link to those.
Thanks again, Doug and Jeff for having joined us today.
Jeff Hauser: Thanks for having us.
Doug Henwood: Thanks for having me.
Greg Wilpert: And thank you for joining the Real News Network.