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Turns Out $2 Trillion in Stimulus Isn’t Nearly Enough Stimulus

Turns Out $2 Trillion in Stimulus Isn’t Nearly Enough Stimulus

Sunday, 12 April, 2020 - 11:45

A decade ago, banks were the hot zones of the financial crisis. Today they’re being asked to help with coronavirus rescues, including funneling government-backed loan money to small businesses. But that’s turning out to be complicated and potentially thankless work, writes Matt Levine. No wonder the program’s off to a rocky start.

Many European banks, meanwhile, also face that old-timey financial-crisis problem of having hard-to-sell assets gunking up their balance sheets, writes Elisa Martinuzzi. We’ll soon find out the hard way if these banks learned any risk-management lessons from that other crisis.

When you look up historical data on monthly changes to America’s nonfarm payrolls at, you get a headache-inducing table.

There is a 701 number down in the lower left-hand corner which represents the 701,000 job losses in March the BLS just reported. The (P) means it’s preliminary data; it will be revised a lot. Whatever the final number is, exactly, it’s a lot of job losses. It’s on par with some of the worst months of 2008 and 2009, which you can see at the top of the table.

Here’s the thing: April’s number could be 30 times as big, Bloomberg economists estimate. That means these neat little boxes, accustomed to holding no more than three figures, will be stretched to accommodate something like 20 million job losses. In one month. There’s never been anything like it; not even close. We will need more, much more, than the stimulus spending we’ve seen so far to get the economy to the post-virus promised land in one piece.

For example, the $350 billion set aside for small-business loans won’t be nearly enough, writes Tim O’Brien. That amount is premised on the idea coronavirus lockdowns will be relatively brief and that everybody will get right back to normal quickly. That seems unlikely. Small businesses are woven into the fabric of American life, employing half of all working-age adults. There will be no getting back to normal if we don’t help them.

Bailing out businesses, however, shouldn’t include rescuing private equity firms that loaded small companies with debt to pay themselves dividends, argues Shuli Ren. They have the capital, and the means of raising more, to bolster their distressed companies.

As we wrote earlier, the unemployment benefits system isn’t designed to handle this catastrophe. Narayana Kocherlakota suggests the government should instead directly pay the full wages and benefits of anybody who has lost a job because of the virus. This could cost $2 trillion if done for three months, but it’s worth it.

We must also do more to help the 550,000 homeless Americans, most of whom live in crowded shelters where they’re especially vulnerable to the virus, Tracy Walsh writes. Helping the homeless socially distance isn’t just a moral issue; it’s a public-health imperative, given how many of them work in low-wage jobs we suddenly realize are essential, such as food preparation and delivery.

America’s crumbling infrastructure, like its lack of affordable housing, is another long-term problem whose time may finally have come. President Donald Trump says he wants infrastructure spending as part of some future stimulus plan, and Noah Smith agrees this is a great idea. But Trump may not like Noah’s prescription for spending: It should come in the form of direct grants to the states and include projects that prepare us for a greener future. This could cost another $2 trillion, at least. But this is the age of big numbers.


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