The Social Distancing Economy: a Q&A with eight economists, analysts, and researchers of the RAND Corporation.

Krishna B. Kumar « In the longer term, traditional fiscal policy and monetary policy can be effective if targeted carefully. This is where some thought needs to be put in, rather than rushing to fund everyone’s pet project. In particular, a payroll tax cut is likely to be ineffective if people don’t have jobs in the first place. »

Patricia K. Tong « In terms of the type of stimulus, if one of the goals is to promote spending, then research has shown that giving folks a one-time lump sum payment is much more effective than giving people smaller amounts of income over time through their paychecks.  »

Liisa Ecola « I assume another factor that would limit the effectiveness of unemployment insurance or payroll tax cuts is the number of people who work for a living but are not classified as employees. I see that some of the companies whose business models depend on this type of labor supply are trying to help, but they also have a history of doing everything they can to keep their workers legally contractors. It seems like we need a broader rethink of how some safety-net measures are tied to your status as an employee. »

Jonathan Welburn « One of the reasons why the Big 3 automakers were bailed out was interdependence. At the time, a failure from one was likely to bring down all three due to their interdependent supply chains. I’ll also point out that when credit is constrained for firms, things can happen incredibly fast. We should understand key industries that are prone to correlated failures. »

Benjamin Miller « This pandemic and the public health response to it will severely impact revenues for a wide variety of industries—aviation, hospitality, restaurants, events management, and more. Ensuring these businesses can weather the storm until restrictions on public gatherings are lifted and demand for travel resumes is key to ensuring the economy bounces back quickly after the immediate health concerns have abated. That said, this support should come with careful thought about the conditions under which the federal taxpayer should be the de facto insurer, as that comes with moral hazard concerns. This may include careful thought about the strings attached to any assistance from federal taxpayers. Two good rules of thumb: First, the federal taxpayer should be the lender of last resort. Second, any federal assistance should be directly tied to addressing challenges caused by the pandemic rather than being treated as an opportunity to secure long-standing industry priorities for tax or regulatory relief. »

Debra Knopman « Given funds are likely to be scarce since several parts of the economy would need help, attention has to be paid to: a) conditions under which corporations would receive government funds which others have suggested (e.g., cut CEO pay, no stock buy-backs, no layoffs, etc.), and b) the conditions under which corporations would be expected to pay back whatever was borrowed. The aim is to aid sound firms with the best prospects of doing well and that can help the economy in general. »

Kathryn A. Edwards « I would argue that unemployment insurance is not a functional program… And often UI extensions during recessions are time and benefit durations for individuals already receiving UI, but don’t expand the pool of recipients. »

Krishna B. Kumar « Recessions have lasted only a few months to a couple of years (the Great Depression was truly unique). My bet is on at least a short recession/slowdown lasting for a few months. »

Debra Knopman « One thing we may learn more about in the coming weeks is whether there are other things going on in both equity and bond markets that may affect the recovery time and the quality of the recovery (job creation or job stagnation as we had in the first half dozen or more years of this last “recovery”). Something weird is going on with bond markets (including the market for municipal bonds—the real workhorses of local infrastructure spending), according to stories reported last week. »

[ Corona virus, COVID-19 ]



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