Let me endorse this as a thoughtful assessment of how important it is to keep the economy from sending anybody a "you are bankrupt: shut down" signal by the economy in this public health crisis. Instead, every business and every workers should be being sent a "you are, at most, on pause: be ready to resume" signal by the economy. How to make sure that signal is sent requires fiscal stimulus an order of magnitude greater than the $2.2 trillion currently in the headlines. For one thing, it requires tolerance of inflation, as prices of medical equipment and necessities rise and as social distancing temporarily reduces productivity elsewhere in the economy: Peter R. Orszag: Social Distancing Makes Sense Only With Huge Fiscal Stimulus https://www.bloomberg.com/opinion/articles/2020-03-22/social-distancing-makes-sense-only-with-huge-fiscal-stimulus: 'Mandating social distancing in response to the Covid-19 crisis requires socializing the economic costs of doing so. We as a society can’t reasonably require social distancing, with the massive economic consequences it entails, and believe that most of those costs should be privately borne. We therefore need to either abandon social distancing (thereby overwhelming health systems and sparking untold deaths) or enact much larger stimulus measures. And by much larger I mean far larger even than the eye-popping figures the Trump administration is now pursuing.... The disruption is so vast... that government failure to act will result in an avalanche of bankruptcies and extended unemployment that will, in turn, inflict lasting damage on businesses and families, even after the health crisis passes... not being able to put Humpty Dumpty back together again. It is why government intervention cannot be limited to the sectors most directly affected (airlines and hotels, for example) and must take new forms beyond the conventional tools (such as rebates to individuals). While many existing stimulus measures are necessary and helpful... they are terribly inadequate... The dilemmas we face will continue until an effective anti-viral or therapeutic can be found that allows us to contract the disease without suffering significant harm. In the meantime, even if current efforts are successful at attenuating the spread of the disease over the next several weeks, social distancing will need to be re-imposed in cycles. Given the plausible timetable for developing a vaccine, and unless we get very lucky and the virus itself mutates in a less harmful direction, these cycles could continue for well more than a year.... This is a fiscal risk worth taking.... [To] those who argue that the cost is too high or that a stunning increase in the deficit is too risky [I say:] If you don’t like the fiscal cost but you favor social distancing, what you’re really saying is that you are willing to accept millions of bankruptcies and the ripping apart of corporate and social fabrics across the world.... The economic harm comes mostly from the sudden stop... The demographics of those suffering from coronavirus and those suffering from the economic virus are quite different.... Emmanuel Saez and Gabriel Zucman have proposed that governments simply pay companies to cushion the shock: “In the context of this pandemic, we need a new form of social insurance, one that directly targets and works through businesses,” they wrote earlier this month. “The most direct way to provide this insurance is to have the government act as a buyer of last resort. If the government fully replaces the demand that evaporates, each business can keep paying its workers and maintain its capital stock, as if it was operating under business as usual.” And Andrew Ross Sorkin of the New York Times has suggested a universal loan program, with a zero interest rate and extended repayment terms. One thing is clear about stimulus measures in this crisis: Bigger is better...


#noted #2020-03-27

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