1 00:00:05,680 --> 00:00:10,920 Speaker 1: Welcome to Prognosis. I'm Laura Carlson. It's day twenty three 2 00:00:11,080 --> 00:00:16,800 Speaker 1: since coronavirus was declared a global pandemic. Today, the government 3 00:00:16,960 --> 00:00:20,280 Speaker 1: has a plan to help Americans struggling because of COVID 4 00:00:20,360 --> 00:00:26,040 Speaker 1: nineteen by sending them direct checks, but some economists have 5 00:00:26,280 --> 00:00:30,840 Speaker 1: always advocated for handing out money to nearly everyone in 6 00:00:30,880 --> 00:00:45,240 Speaker 1: good times and bad. But first today's news. The number 7 00:00:45,240 --> 00:00:49,440 Speaker 1: of Americans applying for unemployment benefits surged to a record 8 00:00:49,680 --> 00:00:53,400 Speaker 1: six point six five million last week. That level was 9 00:00:53,600 --> 00:00:58,960 Speaker 1: unimaginable just a month ago, as state shutdown commerce to 10 00:00:59,040 --> 00:01:03,320 Speaker 1: prevent the deadly coronavirus from spreading. The weekly jobless claims 11 00:01:03,320 --> 00:01:06,399 Speaker 1: have been among the first detailed figures to show the 12 00:01:06,440 --> 00:01:10,440 Speaker 1: devastating hit to the U S economy. There will be 13 00:01:10,520 --> 00:01:16,360 Speaker 1: more unprecedented economic indicators to come. New York's coronavirus outbreak 14 00:01:16,480 --> 00:01:20,479 Speaker 1: shows no sign of abating, with almost seven hundred new 15 00:01:20,520 --> 00:01:24,679 Speaker 1: infections and more than four hundred new deaths, according to 16 00:01:24,760 --> 00:01:29,520 Speaker 1: Governor Andrew Cuomo. Cuomo said at the current infection rate, 17 00:01:29,880 --> 00:01:33,399 Speaker 1: the state is six days away from exhausting its stockpile 18 00:01:33,480 --> 00:01:39,759 Speaker 1: of mechanical ventilators. Across the country, states Demands from masks, gloves, 19 00:01:39,959 --> 00:01:42,600 Speaker 1: face shields, and even body bags to help deal with 20 00:01:42,600 --> 00:01:47,560 Speaker 1: the coronavirus pandemic far outstrips the federal government's ability to respond. 21 00:01:48,320 --> 00:01:51,880 Speaker 1: This was according to documents released Thursday by the House 22 00:01:51,920 --> 00:01:56,560 Speaker 1: Oversight Committee, and the Democratic Convention became the latest major 23 00:01:56,680 --> 00:02:01,160 Speaker 1: US event to announce a coronavirus related delay. The Democratic 24 00:02:01,320 --> 00:02:06,240 Speaker 1: National Committee postponed the presidential nominating convention from July to 25 00:02:06,320 --> 00:02:12,440 Speaker 1: August seventeen. Spain reported an increase in coronavirus deaths and 26 00:02:12,560 --> 00:02:17,000 Speaker 1: new cases. Even the country's severe containment measures have yet 27 00:02:17,040 --> 00:02:21,040 Speaker 1: to bring the outbreak under control. The country's health ministry 28 00:02:21,080 --> 00:02:24,720 Speaker 1: recorded its deadliest day on Thursday, with nine hundred and 29 00:02:24,720 --> 00:02:28,480 Speaker 1: fifty fatalities, lifting the total to more than ten thousand 30 00:02:29,760 --> 00:02:33,480 Speaker 1: in Italy, the country worst hit in Europe. Some signs 31 00:02:33,480 --> 00:02:36,799 Speaker 1: show the containment measures may be starting to work. New 32 00:02:36,840 --> 00:02:41,200 Speaker 1: infections slowed on Thursday, while the number of deaths rose slightly. 33 00:02:47,800 --> 00:02:52,320 Speaker 1: Now to today's main story, the economic theory behind giving 34 00:02:52,360 --> 00:02:57,959 Speaker 1: money to everyone in a crisis. Last Friday, US President 35 00:02:58,080 --> 00:03:02,000 Speaker 1: Donald Trump signed a two trillion dollars stimulus package into law. 36 00:03:03,040 --> 00:03:06,000 Speaker 1: Under the bill, the US government will make direct payments 37 00:03:06,040 --> 00:03:09,919 Speaker 1: to Americans to help offset the financial hardships the pandemic 38 00:03:10,000 --> 00:03:14,399 Speaker 1: has caused. Giving everybody money with no strings attached has 39 00:03:14,400 --> 00:03:19,240 Speaker 1: an obvious benefit in an economic emergency, but some economists 40 00:03:19,240 --> 00:03:22,160 Speaker 1: have been proponents of doing something like this even in 41 00:03:22,240 --> 00:03:27,040 Speaker 1: a good economy. What's the theory behind handing out money? 42 00:03:27,360 --> 00:03:32,919 Speaker 1: Should everyone get the same amount? Not everyone agrees. Bloomberg's 43 00:03:33,000 --> 00:03:37,240 Speaker 1: Joe Wisenthal recently spoke to economist Claudius Som on the 44 00:03:37,240 --> 00:03:42,480 Speaker 1: Odd Lots podcast to understand how distributing direct payments works. 45 00:03:49,520 --> 00:03:52,840 Speaker 1: On Friday March, the U S House of Representatives past 46 00:03:52,880 --> 00:03:56,000 Speaker 1: the largest aid measure in American history, of two trillion 47 00:03:56,040 --> 00:04:00,840 Speaker 1: dollars stimulus package that President Donald Trump signed until after 48 00:04:00,960 --> 00:04:04,600 Speaker 1: days of intense discussions, the Senate has reached a bipartisan 49 00:04:04,640 --> 00:04:09,880 Speaker 1: agreement on a historic relief package for this pandemic. The 50 00:04:09,880 --> 00:04:13,400 Speaker 1: bipartisan Karasak will squarely address each of the four big 51 00:04:13,440 --> 00:04:16,560 Speaker 1: priorities that I laid out in my legislation at the 52 00:04:16,600 --> 00:04:19,720 Speaker 1: beginning of the process about a week ago. It will 53 00:04:19,800 --> 00:04:24,320 Speaker 1: rush financial assistance to Americans through direct checks to households 54 00:04:25,000 --> 00:04:27,920 Speaker 1: from the middle class on down, and through a significant 55 00:04:27,960 --> 00:04:33,320 Speaker 1: and creative expansion of unemployment insurance during this emergency, it 56 00:04:33,440 --> 00:04:36,640 Speaker 1: will deliver historic Under the stimulus package, direct payments will 57 00:04:36,680 --> 00:04:39,800 Speaker 1: be made to Americans to help offset the financial hardships 58 00:04:39,839 --> 00:04:43,000 Speaker 1: that have resulted from the coronavirus pandemic. That number could 59 00:04:43,040 --> 00:04:46,080 Speaker 1: be as high as fift dollar per person. Well, what 60 00:04:46,160 --> 00:04:53,360 Speaker 1: are the arguments for and against this movie? A few 61 00:04:53,400 --> 00:04:58,599 Speaker 1: weeks ago, prior to the initial jobless claim soaring and 62 00:04:58,760 --> 00:05:02,680 Speaker 1: the overwhelming evidence that the US was heading into a 63 00:05:02,760 --> 00:05:07,400 Speaker 1: deep recession, if not a depression, my colleague Tracy Elloway 64 00:05:07,520 --> 00:05:10,839 Speaker 1: and I had the luxury of talking with Claudia Song. 65 00:05:10,960 --> 00:05:15,000 Speaker 1: Claudia is the director of macroeconomic Policy at the Center 66 00:05:15,040 --> 00:05:18,000 Speaker 1: for Equitable Growth, and she is an expert on what 67 00:05:18,120 --> 00:05:22,560 Speaker 1: it takes to prevent a recession. I wanted to bring 68 00:05:22,600 --> 00:05:26,320 Speaker 1: in some of Claudia's thoughts about what she thought was necessary, 69 00:05:26,360 --> 00:05:29,640 Speaker 1: and so for this first segment, she discussed the importance 70 00:05:29,720 --> 00:05:33,800 Speaker 1: of just giving people money. Why you need to just 71 00:05:33,920 --> 00:05:37,840 Speaker 1: hand people checks from the government in order to stave 72 00:05:37,839 --> 00:05:43,320 Speaker 1: off a recession. So when I talk about this fiscal 73 00:05:43,360 --> 00:05:46,600 Speaker 1: response so in a recession, I think there's two principles 74 00:05:46,640 --> 00:05:48,920 Speaker 1: that we should be working on. One is we should 75 00:05:48,920 --> 00:05:52,680 Speaker 1: go wide, so that's this idea of giving money to everybody. 76 00:05:52,720 --> 00:05:55,960 Speaker 1: So that's that's covering the breadth. I think it is important, 77 00:05:55,960 --> 00:05:57,880 Speaker 1: and you're going to hear a lot more people talking 78 00:05:57,920 --> 00:06:02,080 Speaker 1: about targeted stimulus. People who get sick right now, people 79 00:06:02,120 --> 00:06:05,440 Speaker 1: who are quarantined, they should get money. They should get 80 00:06:05,440 --> 00:06:08,000 Speaker 1: more money because they're they're the ones that are sick, 81 00:06:08,040 --> 00:06:11,640 Speaker 1: they're they're suffering the most. Give them more because right 82 00:06:11,640 --> 00:06:14,520 Speaker 1: now people are freaking out right because they don't know 83 00:06:14,640 --> 00:06:17,240 Speaker 1: if they are going to get sick. They don't know 84 00:06:17,240 --> 00:06:22,840 Speaker 1: if someone their family is going to get sick. Another 85 00:06:22,920 --> 00:06:26,080 Speaker 1: key point that Claudia brought up was that households have 86 00:06:26,680 --> 00:06:30,919 Speaker 1: very few financial buffers. Even in a wealthy country, a 87 00:06:30,960 --> 00:06:34,120 Speaker 1: lot of households just don't have the money to cover 88 00:06:34,279 --> 00:06:39,039 Speaker 1: emergency expenses. As such, if you give people money, it 89 00:06:39,120 --> 00:06:42,120 Speaker 1: will be spent. There are many people who are one 90 00:06:42,160 --> 00:06:46,960 Speaker 1: paycheck even some cut hours away from serious financial distress. 91 00:06:47,760 --> 00:06:51,000 Speaker 1: So if you know that about yourself, and you don't 92 00:06:51,000 --> 00:06:52,680 Speaker 1: know if you're going to get the virus, and you 93 00:06:52,720 --> 00:06:54,479 Speaker 1: don't know if you're gonna be out for two weeks 94 00:06:54,480 --> 00:06:56,880 Speaker 1: from work and you won't get paid if you're out, 95 00:06:57,600 --> 00:06:59,800 Speaker 1: then you're not going to go out and buy like 96 00:07:00,640 --> 00:07:04,920 Speaker 1: the new washing machine, or put the offer on the house, 97 00:07:05,400 --> 00:07:08,039 Speaker 1: or you know, by go out to the rush. There's 98 00:07:08,080 --> 00:07:09,720 Speaker 1: just so many things that you'll do right now to 99 00:07:09,800 --> 00:07:14,800 Speaker 1: cut back because you don't know if Americans across the 100 00:07:14,840 --> 00:07:18,440 Speaker 1: country do that all at once in the next couple 101 00:07:18,480 --> 00:07:21,240 Speaker 1: of months. That's how you take an economy with a 102 00:07:21,320 --> 00:07:25,360 Speaker 1: three and a half percent unemployment rate, really solid GDP 103 00:07:25,480 --> 00:07:28,240 Speaker 1: growth and turn it into a recession because like that, 104 00:07:28,320 --> 00:07:31,800 Speaker 1: once that dynamic gets going, it doesn't matter how much 105 00:07:31,800 --> 00:07:34,400 Speaker 1: you give to the like you know, five percent of 106 00:07:34,440 --> 00:07:39,040 Speaker 1: the population that becomes severely ill, we could get past 107 00:07:39,080 --> 00:07:42,560 Speaker 1: the virus itself and have the economy already be into 108 00:07:42,600 --> 00:07:46,400 Speaker 1: a tailspin that you can't then arrest as easily as 109 00:07:46,440 --> 00:07:49,920 Speaker 1: you could. Right now, we do not have a good 110 00:07:49,920 --> 00:07:54,440 Speaker 1: safety net. We do not have financial buffers, Like a 111 00:07:54,520 --> 00:07:58,960 Speaker 1: huge fraction of US households do not have a paychecks worth, 112 00:07:59,560 --> 00:08:02,640 Speaker 1: let a own like five worth of money just sitting 113 00:08:02,640 --> 00:08:06,800 Speaker 1: around that they can access quickly. And finally, one of 114 00:08:06,840 --> 00:08:10,600 Speaker 1: the questions in the stimulus bill is how widely the 115 00:08:10,640 --> 00:08:13,480 Speaker 1: money should go. Should it go to everyone, should it 116 00:08:13,560 --> 00:08:16,800 Speaker 1: just go to people in affected industries? Should it just 117 00:08:16,840 --> 00:08:20,280 Speaker 1: go to people who have been laid off. Claudia argues 118 00:08:20,320 --> 00:08:24,120 Speaker 1: that the money should go Why I advocate for this 119 00:08:24,240 --> 00:08:27,920 Speaker 1: going wide and giving everyone money not because I think 120 00:08:28,040 --> 00:08:31,880 Speaker 1: everyone needs five Okay, I do it because I think 121 00:08:31,880 --> 00:08:34,200 Speaker 1: that's something you can do the fastest, and I think 122 00:08:34,200 --> 00:08:37,880 Speaker 1: it's the most politically feasible. I mean, nothing is really 123 00:08:37,880 --> 00:08:39,880 Speaker 1: politically feasible right now. But it feels to me like 124 00:08:39,960 --> 00:08:45,760 Speaker 1: that is because everybody gets it. Once you get into targeting, unemployment, insurance, 125 00:08:45,800 --> 00:08:48,640 Speaker 1: food stamps, any of these are a good example, there 126 00:08:48,640 --> 00:08:53,600 Speaker 1: can be this feeling of well, I saved up, I 127 00:08:53,760 --> 00:08:56,280 Speaker 1: worked hard so that when there was a tough time 128 00:08:56,320 --> 00:08:58,480 Speaker 1: in my life, I didn't have to go get food stamps. 129 00:08:58,960 --> 00:09:01,480 Speaker 1: Why should I, as a taxpayer, pay for somebody else 130 00:09:01,520 --> 00:09:03,480 Speaker 1: to go get food stamps when I know they were out, 131 00:09:03,520 --> 00:09:06,120 Speaker 1: you know, god, taking their kids out to dinner before 132 00:09:06,160 --> 00:09:09,040 Speaker 1: they you know, got laid off. And then on top 133 00:09:09,120 --> 00:09:13,240 Speaker 1: of that, there is research, there is incredibly good research 134 00:09:13,320 --> 00:09:15,320 Speaker 1: from the two thousand one tax rebates and the two 135 00:09:15,640 --> 00:09:19,040 Speaker 1: eight stimulus payments that says people will spend it. But 136 00:09:19,040 --> 00:09:21,199 Speaker 1: but this this trope will not go away. I was 137 00:09:21,200 --> 00:09:23,480 Speaker 1: talking to someone who's been a lot of conversations with 138 00:09:24,360 --> 00:09:28,200 Speaker 1: Republican economic staff, and time and again they say, well, 139 00:09:28,200 --> 00:09:30,480 Speaker 1: but they're just going to save it. But there are 140 00:09:30,520 --> 00:09:34,319 Speaker 1: a lot of US households that they keep their spending 141 00:09:34,320 --> 00:09:37,720 Speaker 1: and their income really closely tied, and a lot of 142 00:09:37,760 --> 00:09:39,959 Speaker 1: them like they don't have a lot of income, right, 143 00:09:40,480 --> 00:09:42,959 Speaker 1: I mean, wage growth has not been good. Like if 144 00:09:43,000 --> 00:09:45,719 Speaker 1: you give them money, they will spend it. So I 145 00:09:45,760 --> 00:09:49,040 Speaker 1: think there's this aspect of if we make sure that 146 00:09:49,120 --> 00:09:52,400 Speaker 1: everybody knows we the government is here, we're going to 147 00:09:52,520 --> 00:09:55,360 Speaker 1: help all of you, then it might give some space 148 00:09:55,440 --> 00:09:57,319 Speaker 1: to be like, Okay, well, now that we've helped everybody, 149 00:09:57,360 --> 00:10:00,840 Speaker 1: we really do need to especially help those who hit hard. 150 00:10:14,880 --> 00:10:18,320 Speaker 1: To listen to Joe's full interview with Claudia Sam, download 151 00:10:18,360 --> 00:10:21,440 Speaker 1: the March twelfth episode of Odd Lots and subscribe to 152 00:10:21,440 --> 00:10:23,880 Speaker 1: the show for more of the stories behind the markets. 153 00:10:25,800 --> 00:10:29,360 Speaker 1: And that's it for the Prognosis Daily edition. For more 154 00:10:29,440 --> 00:10:32,160 Speaker 1: on the coronavirus crisis from a hundred and twenty bureaus 155 00:10:32,200 --> 00:10:37,640 Speaker 1: around the world, visit Bloomberg dot com slash coronavirus. If 156 00:10:37,640 --> 00:10:40,480 Speaker 1: you appreciate the podcast, please take a moment to rate 157 00:10:40,559 --> 00:10:43,280 Speaker 1: us and leave us a review on Apple Podcasts or 158 00:10:43,360 --> 00:10:48,360 Speaker 1: Spotify to help more listeners find our global reporting. The 159 00:10:48,400 --> 00:10:52,680 Speaker 1: Prognosis Daily Edition is hosted by Me Laura Carlson. The 160 00:10:52,720 --> 00:10:56,720 Speaker 1: show is produced by Me Tophor foreheads Jordan Gaspoure and 161 00:10:56,840 --> 00:11:02,760 Speaker 1: Magnus Hendrickson. Reporting by Joe Wisenhal. Original music by Leo Sidrin. 162 00:11:03,520 --> 00:11:07,960 Speaker 1: Our editors are Francesca Levi and Rick Shine. Francesca Levi 163 00:11:08,280 --> 00:11:11,559 Speaker 1: is Bloomberg's head of podcasts. Thanks for listening.