Economist Austan Goolsbee offers three scenes, in his words, for addressing the coronavirus pandemic. All three, in the order he presents them, are sound. Most economic schools of thought – and all sound ones across the continuum – would consider something like his suggestions in response to a pandemic.
One obvious note – or at least a note that should be obvious. Republicans like Sen. Ron Johnson who think think benefits will incentivize people not to work are either profoundly ignorant or profoundly stupid. (Most people are sharp; there are very few people who are anything like stupid. Perhaps one needs to make an exception for Johnson. He may truly have a head full of mush.)
The labor force – and free markets in labor – are now being prevented or discouraged from working due to illness or concern of becoming ill. We’ve a unique public health problem, across our entire continent, and under that condition a unique labor market concern arises: laborers who are too close together only risk greater weakness to themselves and across the labor pool. We don’t have a problem incentivizing to people not to work, so to speak – we have a problem of not incentivizing people to stay home when they should be away from others.
Anyone with even an elementary grasp of free markets in labor should be able to understand this regrettable result of a pandemic.
Goolsbee’s suggestions immediately follow —
Scene 1:VIRUS ECONOMICS
Here the most important thing you can do for the economy is slow the virus or show it has a lower bound. Pay sick not to work, buy ventilators, test/isolate. Nothing works until you get a handle on this.
Scene 2: PREVENT FOREVER DAMAGE FROM NOW PROBLEMS
Even if it rebounds soon, many businesses & ppl will not be able to survive the shock. Extensions on loans, food stamps, bankruptcy/foreclosure moratoria, money to stave off permanent collapse is key here.
Scene 3: STIMULUS
Only AFTER 1 and 2 can you effectively get ppl spending again. Personally I favor cutting sales taxes here because it incentivizes actual spending rather than more savings if people remain fearful after virus wanes but any good bang-for-buck stuff here works.
But there’s danger in trying 3 before 1 or 2: if govt spends $500b and nothing happens but rich people get another tax cut, no one will agree to any further stimulus again.
And there’s good hay to be made in using #1 as stimulus—govt program to 3x ventilators, rent out entire hotels for 6 mos for care centers, whatever. Do the WWII mobilization type stuff applied to health. It ramps down fear can help move us quicker to scenes 2 and 3.
As in financial crisis, you can do anything until you stop the bank runs. Here the runs are ordinary people withdrawing from the economy. You have to address the health side before they will come back.