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Possible Lessons From A Recession-Era Federal Economist About Coronavirus Response


The coronavirus is more than just a public health crisis, it is also an economic one. Hundreds of thousands of people have been laid off in the past few days alone. The Senate today passed an aid package worth billions of dollars. President Trump is floating a plan to give checks to Americans, to cut payroll taxes and to bail out industries hit especially hard. None of those are in the Senate bill. How much would all that cost?


PRESIDENT DONALD TRUMP: Hasn't been determined yet, but it will shortly be determined. And people want to go big as opposed - everybody seems to want to go big. And they want to get to the recovery.

SHAPIRO: That was President Trump at a briefing earlier today. Betsey Stevenson joins us now. She's a professor of public policy and economics at the University of Michigan. And she served on President Obama's Council of Economic Advisers.


BETSEY STEVENSON: It's nice to talk with you.

SHAPIRO: Let's take these proposals from the Trump administration one at a time, starting with direct payments - cutting checks to Americans. As an economist, is this something that you would recommend?

STEVENSON: Absolutely. It's exactly what we need to do right now. The advantage of direct payments to all Americans is that it can get a lot of money out the door right away, and a lot of people right now need some help paying their bills.

SHAPIRO: Another idea the president is pushing is a payroll tax cut. What kind of stimulus would that provide?

STEVENSON: A payroll tax cut is incredibly inequitable because it gives more to those who earn the most. So most important for today's circumstances, it gives a lot to the people who continue to have big incomes because think about what it's doing - it's reducing the taxes you're going to pay on those big incomes and gives absolutely nothing to those who lost their income.


STEVENSON: That's the opposite of what's needed right now, so the important thing today is to help people who can't pay rent, put food on the table or pay their bills. A lot of people are talking about, should we do something even more targeted than direct payments? The good thing about getting those checks out the door is we can do it quick and fast, but the payments have to be big enough that people who get them can pay their rent and do the essentials that they need to do to be able to keep going.

SHAPIRO: And then the third proposal is bailouts, which could be for airlines, cruise ships, the restaurant industry. I mean, airlines alone have asked for $50 billion. As you know, after the economic collapse of 2008 there, was a lot of anger over bailouts, specifically for banks. How can the administration get bailouts right?

STEVENSON: So the word bailout is really confusing because there's a big difference between shoveling money to companies that they get to keep forever and giving them a loan. If we give them a loan, we're helping them out with liquidity. And that's actually a lot of what was done in the last recession. The Troubled Asset Relief Program, TARP, which got a lot of criticism for the big amounts of money that went out the door, all the money that TARP sent out got paid back. Now, it didn't all get paid back exactly the same.

So probably the right analogy here is thinking about the auto industry bailout. We got $80 billion to the auto industry, but they paid $71 billion of it back. So it's mostly about loans, liquidity and helping them stay afloat. The airlines absolutely need that kind of increase in liquidity. They need some help with loans.

There's going to be other industries that need some help with loans. Giving them big, fat handouts that they never have to pay back - that I'm a little bit more skeptical of. And so I want us to be a little bit careful when we talk about that. And instead of talking about a $50 billion bailout package for the airlines, let's talk about the $25 billion they asked for in grants - free money - and the $25 billion they've asked for in loans. That's money that taxpayers are going to get back.

SHAPIRO: Are there other creative solutions that you wish the government were considering? I mean, I've heard people talk about freezing evictions or doing something for debt relief if people owe credit card debt or things like that.

STEVENSON: So I think those things are incredibly important. So, first of all, we can just think about the humanity of it. We can't evict people right now when everybody's sheltering or trying to stay within their own homes. But beyond that, people are going to just face difficulty making loan payments, making student loan payments, making mortgage payments, making credit card payments. If we let this temporary shock cause a wave of bankruptcies, foreclosures and ruined credit scores, it's going to be even harder to come out of this recession.

So we want to help people not have those kinds of problems, both for them - nobody wants to lose their home over this - but also for the broader economy because if we don't stop that, it's like a set of dominoes. It's going to make it harder for us to come out of the recession. The government's goal needs to be to try to give us that beautiful V-shaped recession, which is going to be a sharp dip down but a equally big rocket boost right out of it.


STEVENSON: You can't do that if there's a wave of foreclosures.

SHAPIRO: Let me ask you about timing because the Senate voted today on a plan that the House approved last week, which is fast for Congress, but it seems like events are moving much faster in the real world. Do you think the government needs to be moving more quickly than it is?

STEVENSON: I do think it needs to be moving more quickly. I think it needs to do everything it can. And I think the good thing is it does seem like there is some bipartisan agreement that, you know - you just had the president saying there needs to be a lot of money in this. You've heard people on both sides of the aisle are saying, we need a big fiscal response, so it's transcending politics just like the coronavirus. We've got to get money out the door as fast as possible, so Congress is going to have to be a little bit more nimble than it normally is.

SHAPIRO: Just in our last 30 seconds, you were chief economist at the Labor Department in 2010 and 2011. How would you compare what the economy is up against now to what you faced during the Great Recession?

STEVENSON: In the last recession, you know, we had a big decline, and we didn't come out of it very quickly because of the fact that there was this wave of financial crises. We're obviously going to have to act a little bit bigger and bolder now and particularly because we can't push people back into the stores. That's a big difference between now and then.

SHAPIRO: All right.

STEVENSON: So we need to be fast and learn from our last experience.

SHAPIRO: Betsey Stevenson of the University of Michigan, thank you very much.

STEVENSON: Thank you. It was nice talking with you. Transcript provided by NPR, Copyright NPR.