Combatting the Coronavirus Recession

March 20, 2020

Building a more resilient economy.

The Roosevelt Rundown is an email series featuring the Roosevelt Institute’s top stories of the week.

A Forward-Thinking Policy Response to the Coronavirus Recession

Mass layoffs, record unemployment claims, and an unprecedented demand shock: With GDP projected to decline at least 5 percent this quarter, the coronavirus pandemic has turned into a full-fledged economic collapse. As Roosevelt Director for Progressive Thought Mike Konczal explains in a new paper, we have the tools to slow the recession and limit its impacts—while laying the tracks for a more resilient economy in the future. For right now, Konczal proposes cash and other direct assistance, strengthened worker protections, direct aid to states and municipalities, federal loans for small businesses, and structured industry bailouts (with terms to prevent future extraction). For the long term: permanent stimulus at 2 percent or more of GDP and a reconception of our fragile social safety net. “Policymakers right now have the chance to put forward a response that meets the moment we’re in: one that is large in size, broad in scope, and sustained over time,” Konczal writes. “There is little risk in doing too much to stabilize the economy; the danger is doing too little.” Read on.

  • Moving forward: “There are three essential aspects to the stimulus plan we urgently need right now: It should be bold and equitable, it should automatically renew, and its temporary programs should be able to evolve into more permanent ones,” Konczal writes for The NationRead more.
  • The need for fiscal policy: “It’s probably too late to stop a recession, but it’s not too late to stop a depression,” Groundwork Collaborative Executive Director and Roosevelt Fellow Michael Linden writes for CNN Business. “Emergency cash payments to nearly all households as soon as possible can help prevent more suffering and boost the economy at the same time. It should be the next step, but it definitely cannot be the last one.” As Roosevelt Chief Economist Joseph Stiglitz told CNBC this week, “it is clearly a case where targeted fiscal policy is what is needed. It’s been true for a long while that monetary policies . . . only have limited efficacy.”

How Much Stimulus Do We Need?

“Is today’s crisis on the scale of 2008’s? It seems very possible that it is. And this time, of course, there is no question of a 5 point fall in interest rates. The federal funds rate coming into the crisis was only 1.5 percent,” Roosevelt Fellow J.W. Mason writes for the blog. “So if we look back to 2008 as a model of the kinds of demand shortfalls our economy can suffer in the face of a severe shock, we should be thinking in terms of a 20 percent fall in private demand . . . And that implies a required stimulus on the order of 13 percent of GDP, or $3 trillion—perhaps sustained over multiple years.” Read on.

Deficit and Debt Shouldn’t Factor into the Recession Response

“Given the magnitude of the crisis, now is not the time for policymakers to worry about raising deficits and debt as they consider what steps to take,” Roosevelt President & CEO Felicia Wong, Center for American Progress President & CEO Neera Tanden, Washington Center for Equitable Growth President & CEO Heather Boushey, and Center on Budget and Policy Priorities President Bob Greenstein write in a joint statement. “Even Harvard’s Greg Mankiw, who chaired President George W. Bush’s Council of Economic Advisers and who normally worries about rising deficits and debt, has said, ‘There are times to worry about growing government debt. This is not one of them.’” Read more.

Business Resiliency Requires Banning Stock Buybacks

With hotels asking for a $250 billion bailout and airlines asking for $50 billion, their history of stock buybacks is drawing renewed scrutiny. As Roosevelt Fellow Lenore Palladino writes for the blog, in the last five years, companies like Marriott, American Airlines, Delta, and United have spent billions on buybacks, with funds that “could have sustained employees through this crisis in the form of paid sick, medical, and family leave.” Any bailout of the private sector, she writes, “must be conditional on an end to the practice of stock buybacks (a condition President Trump says he is “okay with”), along with worker representation on corporate boards going forward, and broader requirements that companies keep workers on their payrolls.” Read on.

How the Coronavirus Will Change the World Permanently

This week, Politico surveyed 34 big thinkers on their predictions for a post-coronavirus world—including Roosevelt Director of Governance Studies Todd Tucker and Roosevelt Vice President of Advocacy and Policy Steph Sterling. “In the years ahead . . . expect to see more support from Democrats, Republicans, academics, and diplomats for the notion that government has a much bigger role to play in creating adequate redundancy in supply chains—resilient even to trade shocks from allies,” said Tucker. Per Sterling, “The reality of fragile supply chains for active pharmaceutical ingredients coupled with public outrage over patent abuses that limit the availability of new treatments has led to an emerging, bipartisan consensus that the public sector must take far more active and direct responsibility for the development and manufacture of medicines.” Read more.

What We’re Reading

How South Korea Scaled Coronavirus Testing While the US Fell Dangerously Behind – ProPublica

The Coronavirus Will Supercharge American Inequality – The Atlantic

The Coronavirus Pandemic and the Racial Wealth Gap – Center for American Progress

A Taxonomy of Bailouts: Comparing the Coronavirus Rescues with Rescues Past – New York Times

What’s the Best Way to Rescue the Economy? – Mother Jones

A Moderate Proposal: Nationalize the Fossil Fuel Industry – New Republic

National Civil Justice Reform: A Proposal for New Federal-State Partnerships – Great Democracy Initiative 

Now Is the Time to Cancel Student Debt – The Nation