Dr. Josh Bivens, the Director of Research at the Economic Policy Institute, has authored an important essay that details the kind of responses policymakers need to fashion in order to lessen the negative impacts of the coronavirus epidemic on the economy. His central message: get moving and soon and focus in the areas in which we can do the most direct good.
Here are some excerpts:
“The three key elements of a potential COVID-19 recession are:
- If it comes it will come fast,
- It will hit lower-wage workers first and hardest, and
- It will impose even faster and larger costs on state and local governments than recessions normally do.
Each one of these should be targeted directly.
Any economic relief package should come online quickly, it should be even more targeted to help lower-wage workers than usual, and it should rapidly boost state and local government capacity on both the public health and economic fronts.”
Bivens’ basic message: we need to get cash in the hands of people who need it right away; the Trump trickledown model of tax breaks for big corporations ain’t gonna get the job done.
“The first two characteristics of a potential COVID-19 slowdown—that it could come fast and come straight for low-wage workers first—suggest one potential response: rapid direct payments to individuals.
In February 2008, the administration of George W. Bush signed the Economic Stimulus Act of 2008, which sent out checks of $600 for individual tax-filers and $1,200 for joint tax filers (and another $300 per child) to blunt the oncoming recession. The first checks were mailed within 6 weeks of the bill’s passage. They were largely “refundable” (i.e., those with even very small amounts of income tax liability received them).
We could use this model but do even better this time. For one, to have a similar stimulus relative to the size of the economy, the checks would have to be larger. Jason Furman, chief economic adviser in the Obama administration, has recommended they be $1,000 for each individual and $500 per child. This seems like a good number to start. The payments should be 100% refundable—they should not be reduced at all for workers and families without income tax liability. They could be increased for lower-income households by starting at $2,000 per individual and $1,000 per child and phase out as incomes rise.
Besides needing money to tide them over when they can’t work, low-wage workers could also use protection against being let go by employers when they can’t show up to work due to their sickness (or the sickness of family members).”
Bivens then details the kind of law changes that would help vulnerable workers, including paid sick days, allowing up to 14 days of paid leave immediately in the current emergency, temporary tax credits for employers to help them cover employee leave, and expanded health care access — including, as was done in 2009, a temporary federal government assumption of states’ responsibility to pay for a share of Medicaid.
In other words:
“Stimulus proposals should take into account the specifics of the economic shock they’re responding to. In coming days and weeks, many proposals will be floated that have nothing to do with the specifics of the shock coming our way. Income tax cuts, or further business tax cuts, or slight pro-business tweaks to the 2017 tax cut will likely be offered up. This is ideological opportunism that nobody should take seriously.”
Click here to read the entire essay.