Tuesday, April 07, 2020

Phase 4 Disaster Relief

by Calculated Risk on 4/07/2020 11:19:00 AM

Note: Most of what I proposed in early March was enacted. This includes Federal government adding to unemployment insurance (UI), expanding the coverage of UI, small business loans, free testing and care, and sending money to everyone (and much much more than I proposed).  That was a start.

Now is the time to address Phase 4 of Disaster Relief. But first, a key point: This is disaster relief, not "stimulus". Many politicians and reporters are used to using the term "stimulus" for government packages. We are NOT trying to stimulate the economy, we are filling in an economic hole.

The first goal of disaster relief is to fight the virus. This includes any and all support for our healthcare workers and first responders, building up the supply chain of critical items like Personal Protection Equipment (PPE), and building a robust test-and-trace program that is a key to reopening parts of the economy.

The second goal of disaster relief is to fill the economic hole caused by the disaster.   There has been a sudden stop in economic activity, however the financial world continues.  Some people are advocating suspending paying bills, such as rents, mortgages, insurance, credit card, bond payments, and other bills during the crisis.  This is a terrible idea. We don’t want to add a financial crisis, on top of an economic crisis, on top of a healthcare crisis. If we have a financial crisis too, it will be much hard to eventually reopen the economy.

We want to provide sufficient economic support during the crisis so that people can pay their bills. This should be the message from all politicians: Pay your bills.

For Phase 4, I'd suggest:

1. Another round of direct payments to households (send another $1,200 this month, and $1,200 next month).
2. Massive support for State and Local governments (Say $2,000 per person in each state).
3. Rent and mortgage assistance for individuals and small businesses.  If the above isn't enough for people to keep paying their bills, then have a program that will provide short term assistance to help pay the bills.

In addition, we need to plan for a resurgence of the virus in the Fall (as Dr. Fauci has warned about).   This includes building up PPE, having adequate masks for all citizens, supporting a robust test-and-trace program, and protecting our Democracy in the Fall.  This includes preparing (and funding) to have mail-in voting in all 50 states in November if needed.