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Why Stimulus Matters Why Stimulus Matters
(6 months later)
This article is part of David Leonhardt’s newsletter. You can sign up here to receive it each weekday.This article is part of David Leonhardt’s newsletter. You can sign up here to receive it each weekday.
The great problem with economic crises is that they’re reinforcing. People stop spending money, which leads other people to lose their jobs or have their incomes reduced. These layoffs and pay cuts lead, in turn, to further cuts in spending. And so on.The great problem with economic crises is that they’re reinforcing. People stop spending money, which leads other people to lose their jobs or have their incomes reduced. These layoffs and pay cuts lead, in turn, to further cuts in spending. And so on.
A century ago, economists didn’t understand how to break this vicious cycle — and the Great Depression ensued. Today, economists do understand: Governments need to step into the void and spend large sums of money, until the economy is able to function healthily again on its own. These sums of money have come to be known as stimulus packages.A century ago, economists didn’t understand how to break this vicious cycle — and the Great Depression ensued. Today, economists do understand: Governments need to step into the void and spend large sums of money, until the economy is able to function healthily again on its own. These sums of money have come to be known as stimulus packages.
This morning, House Democrats and the Trump administration seem close to a deal on a stimulus program. (Senate Republicans have largely sat out the talks, deferring to the Trump administration.)This morning, House Democrats and the Trump administration seem close to a deal on a stimulus program. (Senate Republicans have largely sat out the talks, deferring to the Trump administration.)
According to news reports, the deal includes two weeks of paid sick leave; tax credits for smaller businesses, to help pay for the leave; enhanced unemployment benefits; and federal funds for Medicaid. It also seems likely to include free virus testing.According to news reports, the deal includes two weeks of paid sick leave; tax credits for smaller businesses, to help pay for the leave; enhanced unemployment benefits; and federal funds for Medicaid. It also seems likely to include free virus testing.
Katie Porter, a House Democrat from California, may have played a key role in assuring the free testing. In an exchange that’s worth watching, she pushed the director of the Centers for Disease Control and Prevention to agree to it. “I did the math,” Porter wrote afterward. “A full battery of coronavirus testing costs at minimum $1,331.”Katie Porter, a House Democrat from California, may have played a key role in assuring the free testing. In an exchange that’s worth watching, she pushed the director of the Centers for Disease Control and Prevention to agree to it. “I did the math,” Porter wrote afterward. “A full battery of coronavirus testing costs at minimum $1,331.”
Nancy Pelosi, the House speaker, said Congress would almost immediately begin working on other legislation to address the virus. That’s the right approach. This crisis is unlike anything the country has been through, in its effect on both public health and the economy. The list of closures and cancellations announced in the last 24 hours is staggering: Broadway, Disneyland, music concerts, the Metropolitan Museum of Art, Major League Baseball, the N.C.A.A. basketball tournament, thousands of schools and more.Nancy Pelosi, the House speaker, said Congress would almost immediately begin working on other legislation to address the virus. That’s the right approach. This crisis is unlike anything the country has been through, in its effect on both public health and the economy. The list of closures and cancellations announced in the last 24 hours is staggering: Broadway, Disneyland, music concerts, the Metropolitan Museum of Art, Major League Baseball, the N.C.A.A. basketball tournament, thousands of schools and more.
As Jason Furman, a Harvard economist who helped design the Obama administration’s response to the financial crisis, wrote in The Wall Street Journal last week:As Jason Furman, a Harvard economist who helped design the Obama administration’s response to the financial crisis, wrote in The Wall Street Journal last week:
The likelihood that history judges the economic response to coronavirus as too little and too late is much higher than the converse. If the economic shock is small and stimulus proves to be unnecessary, its negative effects are likely to be small. But if the shock is bigger and policy makers fail to act now, it will be harder to reverse the economic damage. With the federal government able to borrow at a negative real interest rate, doing too much is a minimal risk.
For more …For more …
Derek Thompson, The Atlantic:Derek Thompson, The Atlantic:
In an outbreak, public-health interventions are the most effective stimulus. In many ways, though, giving people money is a public-health intervention. More than 10 percent of Americans skip doctor appointments even when they feel sick, because they don’t think they can afford it. In the next few weeks, the Trump administration may have to request that Americans withdraw from public life — to “cancel everything.” This request to engage in economically damaging activity may be more palatable for many families if it comes with a financial package that compensates them for the damage. In a precarious economy where millions of people feel like they have to work to survive, more Americans will insist on going to work even as they show signs of illness, which means more Americans will be infected, and sick patients will overwhelm America’s hospitals.
Nicholas Kristof and Stuart A. Thompson, in The Times: “Working with infectious disease epidemiologists, we developed this interactive tool that lets you see what may lie ahead in the United States and how much of a difference it could make if officials act quickly. (The figures are for America, but the lessons are broadly applicable to any country.)”Nicholas Kristof and Stuart A. Thompson, in The Times: “Working with infectious disease epidemiologists, we developed this interactive tool that lets you see what may lie ahead in the United States and how much of a difference it could make if officials act quickly. (The figures are for America, but the lessons are broadly applicable to any country.)”
If you are not a subscriber to this newsletter, you can subscribe here. You can also join me on Twitter (@DLeonhardt) and Facebook.If you are not a subscriber to this newsletter, you can subscribe here. You can also join me on Twitter (@DLeonhardt) and Facebook.
Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.