Barnard College, Columbia University and Sanford School of Public Policy, Duke University
The Unemployment Insurance (UI) system is potentially a vitally important way to provide a financial lifeline in the current COVID-19 pandemic – but this potential can only be realized with considerable additional funding and modifications of the current system.
The combination of direct cash payments to households and expanded unemployment insurance benefits make a strong one-two punch designed to get cash into the hands of households quickly. It will enable families to weather the storm and prepare the economy so that it can rebound as quickly as possible once we can commingle safely, and social distancing restrictions are removed. The ability to execute these proposals quickly through the tax system for the checks and through the existing UI system for the unemployment benefits is a significant advantage. Our current world is one of tremendous uncertainty, but these forms of economic stimulus and safety net support have the potential to provide meaningful and productive assistance.
There is a rapidly growing consensus about sending people cash directly to help them cope with the economic fallout of the coronavirus pandemic. For the United States to effectively use cash disbursements in this crisis, it will require finding the appropriate infrastructure to ensure that the payments are rapid, widespread and equitable — and are able to get to those who are in most desperate need, who are often the hardest to reach.
The economic shock of COVID-19 is not going to be even handed: low skilled, low income, and income-poor families with children are all going to be hit harder than everyone else. Cash transfers could help these people during this very challenging time, especially those who have little or no savings and who are already in precarious economic circumstances. But it is important that these transfers reach everyone, including the most vulnerable. Accordingly, this program needs to carefully consider disbursement issues and view cash infusions as one of many strategies to boost the overall economy; otherwise such short term income boosts alone could potentially worsen inequality in the context of COVID-19.
Interruptions to regular business activity through people sheltering at home, limiting both the supply of workers and the demand for goods and services, coupled with panic in financial markets, almost certainly portend a recession. What policies can best soften the economic challenges presented by the coronavirus?
As politicians and government officials around the world struggle to manage the crisis, immediate economic relief will be vital in slowing the spread of disease and cushioning the economic blow. Addressing this crisis demands immediate fiscal stimulus in addition to renewed focus on international cooperation on health. It has also exposed vulnerabilities in U.S. labor markets associated with worsening inequality, which may well dictate the efficacy of a response. Economic proposals need to take into account health risks posed by the virus while also addressing the size and distribution of the economic and financial burdens it will impose.
Much remains unknown and uncertain about the nature of the COVID-19 (coronavirus) pandemic, its trajectory, and the effectiveness of different strategies to slow its progression. But relevant lessons can be drawn from the 1918 influenza pandemic, which was the most severe pandemic in recent history. The death toll of the Spanish flu was not uniform. Factors such as poverty, pollution, and public action played significant roles in determining how deadly the outbreak was for specific places and populations.
What can a public health crisis a century ago teach us about our current circumstances? Socioeconomic status matters. Those who have the fewest resources to cope with a public health crisis may be the ones who are most affected. We need to address their needs. The environment matters. Pollution was a contributing factor to mortality 100 years ago. We overlook current environmental issues at our peril. Protecting our children matters. Disadvantages during formative periods of their lives have the potential to have long-lasting implications. Finally, public policy matters. Attacking a public health problem aggressively is important in limiting its damage. We need to take the current coronavirus threat seriously and react forcefully to forestall potentially meaningful loss of life.
The coronavirus pandemic has contributed to asset market volatility and threats to the smooth functioning of financial markets. The Federal Reserve has taken emergency measures to loosen monetary policy and to stabilize the market for U.S. Treasury securities. What prompted the Fed to take these steps? How will they help alleviate the effects on financial markets of the pandemic? Does this represent a bailout of banks, as some have alleged?
The covid-19 pandemic has created an unprecedented array of problems for the world economy. Those related to public health will surely require difficult and costly solutions. Aggressive fiscal policy and transfers will most likely be needed to address the macroeconomic fallout. With interest rates already so low and the effectiveness of Quantitative Easing uncertain, the Fed’s role in providing macroeconomic stimulus through monetary policy may be limited. But ensuring the smooth functioning of the market for U.S. Treasury securities is an important element of the collective policy response — and one the Federal Reserve is able to do with the tools it has on hand.