[Project Syndicate] The US government should pull out all the stops in mitigating the economic fallout from COVID-19, not just by disbursing cash to all households, but also by implementing a federal job guarantee and many other long-overdue policies. After all, for a self-financing government, money is no object.NEW YORK ‐ The fallout from the coronavirus pandemic will be nothing like that of the 2008 financial crisis, nor will a V-shaped recovery be achieved through conventional stimulus ‐ not even through truly massive conventional stimulus. We are at war with COVID-19, and in wartime, civilian production grinds to a halt and the only work that is needed is for the war effort itself.
Moreover, a recession is sadly necessary to stop the spread of this virus. In the United States, over 50% of jobs are at risk from layoffs, furloughs, reduced pay, and lost hours. Virtually every sector of the economy stands to lose a large chunk of its business, household incomes will be devastated, and spending by consumers and firms will rapidly decline. The manufacturing collapse has already begun; the service economy, which employs 80% of all workers, will be next.
One pandemic thus will lead to another ‐ of unemployment. The avalanche of layoffs will bring a wave of defaults, bankruptcies, and depressed profits. The domino effect will continue across many domains, from collapsing state and municipal tax revenues and business failures to impoverished communities, declining health outcomes, homelessness, and "deaths of despair."
How should governments respond? The same way the US government did under President Franklin D. Roosevelt in the World War II era.
The first priority is to mobilize. That means building temporary field hospitals, drive-through clinics, and emergency health centers. It means cranking up production of essential equipment and medication, staffing health facilities adequately, and establishing support services for the hungry, homeless, and most vulnerable. And it means deploying an army to disinfect airports, schools, and critical public places.
Second, we need to make it easier for people to stay home, such as by implementing short-term debt deferments (including on small business and mortgage loans) and suspending utility bills, as some European countries are already doing. Governments also should be providing income support in the form of extended unemployment insurance, food stamps, and housing benefits. In the US, all work requirements for public benefits should be abolished, and the federal government should extend immediate financial assistance to state governments constrained by balanced-budget laws.