WEBVTT - The Case For Writing Every American a Check 0:00:05.680 --> 0:00:10.920 Welcome to Prognosis. I'm Laura Carlson. It's day twenty three 0:00:11.080 --> 0:00:16.800 since coronavirus was declared a global pandemic. Today, the government 0:00:16.960 --> 0:00:20.280 has a plan to help Americans struggling because of COVID 0:00:20.360 --> 0:00:26.040 nineteen by sending them direct checks, but some economists have 0:00:26.280 --> 0:00:30.840 always advocated for handing out money to nearly everyone in 0:00:30.880 --> 0:00:45.240 good times and bad. But first today's news. The number 0:00:45.240 --> 0:00:49.440 of Americans applying for unemployment benefits surged to a record 0:00:49.680 --> 0:00:53.400 six point six five million last week. That level was 0:00:53.600 --> 0:00:58.960 unimaginable just a month ago, as state shutdown commerce to 0:00:59.040 --> 0:01:03.320 prevent the deadly coronavirus from spreading. The weekly jobless claims 0:01:03.320 --> 0:01:06.399 have been among the first detailed figures to show the 0:01:06.440 --> 0:01:10.440 devastating hit to the U S economy. There will be 0:01:10.520 --> 0:01:16.360 more unprecedented economic indicators to come. New York's coronavirus outbreak 0:01:16.480 --> 0:01:20.479 shows no sign of abating, with almost seven hundred new 0:01:20.520 --> 0:01:24.679 infections and more than four hundred new deaths, according to 0:01:24.760 --> 0:01:29.520 Governor Andrew Cuomo. Cuomo said at the current infection rate, 0:01:29.880 --> 0:01:33.399 the state is six days away from exhausting its stockpile 0:01:33.480 --> 0:01:39.759 of mechanical ventilators. Across the country, states Demands from masks, gloves, 0:01:39.959 --> 0:01:42.600 face shields, and even body bags to help deal with 0:01:42.600 --> 0:01:47.560 the coronavirus pandemic far outstrips the federal government's ability to respond. 0:01:48.320 --> 0:01:51.880 This was according to documents released Thursday by the House 0:01:51.920 --> 0:01:56.560 Oversight Committee, and the Democratic Convention became the latest major 0:01:56.680 --> 0:02:01.160 US event to announce a coronavirus related delay. The Democratic 0:02:01.320 --> 0:02:06.240 National Committee postponed the presidential nominating convention from July to 0:02:06.320 --> 0:02:12.440 August seventeen. Spain reported an increase in coronavirus deaths and 0:02:12.560 --> 0:02:17.000 new cases. Even the country's severe containment measures have yet 0:02:17.040 --> 0:02:21.040 to bring the outbreak under control. The country's health ministry 0:02:21.080 --> 0:02:24.720 recorded its deadliest day on Thursday, with nine hundred and 0:02:24.720 --> 0:02:28.480 fifty fatalities, lifting the total to more than ten thousand 0:02:29.760 --> 0:02:33.480 in Italy, the country worst hit in Europe. Some signs 0:02:33.480 --> 0:02:36.799 show the containment measures may be starting to work. New 0:02:36.840 --> 0:02:41.200 infections slowed on Thursday, while the number of deaths rose slightly. 0:02:47.800 --> 0:02:52.320 Now to today's main story, the economic theory behind giving 0:02:52.360 --> 0:02:57.959 money to everyone in a crisis. Last Friday, US President 0:02:58.080 --> 0:03:02.000 Donald Trump signed a two trillion dollars stimulus package into law. 0:03:03.040 --> 0:03:06.000 Under the bill, the US government will make direct payments 0:03:06.040 --> 0:03:09.919 to Americans to help offset the financial hardships the pandemic 0:03:10.000 --> 0:03:14.399 has caused. Giving everybody money with no strings attached has 0:03:14.400 --> 0:03:19.240 an obvious benefit in an economic emergency, but some economists 0:03:19.240 --> 0:03:22.160 have been proponents of doing something like this even in 0:03:22.240 --> 0:03:27.040 a good economy. What's the theory behind handing out money? 0:03:27.360 --> 0:03:32.919 Should everyone get the same amount? Not everyone agrees. Bloomberg's 0:03:33.000 --> 0:03:37.240 Joe Wisenthal recently spoke to economist Claudius Som on the 0:03:37.240 --> 0:03:42.480 Odd Lots podcast to understand how distributing direct payments works. 0:03:49.520 --> 0:03:52.840 On Friday March, the U S House of Representatives past 0:03:52.880 --> 0:03:56.000 the largest aid measure in American history, of two trillion 0:03:56.040 --> 0:04:00.840 dollars stimulus package that President Donald Trump signed until after 0:04:00.960 --> 0:04:04.600 days of intense discussions, the Senate has reached a bipartisan 0:04:04.640 --> 0:04:09.880 agreement on a historic relief package for this pandemic. The 0:04:09.880 --> 0:04:13.400 bipartisan Karasak will squarely address each of the four big 0:04:13.440 --> 0:04:16.560 priorities that I laid out in my legislation at the 0:04:16.600 --> 0:04:19.720 beginning of the process about a week ago. It will 0:04:19.800 --> 0:04:24.320 rush financial assistance to Americans through direct checks to households 0:04:25.000 --> 0:04:27.920 from the middle class on down, and through a significant 0:04:27.960 --> 0:04:33.320 and creative expansion of unemployment insurance during this emergency, it 0:04:33.440 --> 0:04:36.640 will deliver historic Under the stimulus package, direct payments will 0:04:36.680 --> 0:04:39.800 be made to Americans to help offset the financial hardships 0:04:39.839 --> 0:04:43.000 that have resulted from the coronavirus pandemic. That number could 0:04:43.040 --> 0:04:46.080 be as high as fift dollar per person. Well, what 0:04:46.160 --> 0:04:53.360 are the arguments for and against this movie? A few 0:04:53.400 --> 0:04:58.599 weeks ago, prior to the initial jobless claim soaring and 0:04:58.760 --> 0:05:02.680 the overwhelming evidence that the US was heading into a 0:05:02.760 --> 0:05:07.400 deep recession, if not a depression, my colleague Tracy Elloway 0:05:07.520 --> 0:05:10.839 and I had the luxury of talking with Claudia Song. 0:05:10.960 --> 0:05:15.000 Claudia is the director of macroeconomic Policy at the Center 0:05:15.040 --> 0:05:18.000 for Equitable Growth, and she is an expert on what 0:05:18.120 --> 0:05:22.560 it takes to prevent a recession. I wanted to bring 0:05:22.600 --> 0:05:26.320 in some of Claudia's thoughts about what she thought was necessary, 0:05:26.360 --> 0:05:29.640 and so for this first segment, she discussed the importance 0:05:29.720 --> 0:05:33.800 of just giving people money. Why you need to just 0:05:33.920 --> 0:05:37.840 hand people checks from the government in order to stave 0:05:37.839 --> 0:05:43.320 off a recession. So when I talk about this fiscal 0:05:43.360 --> 0:05:46.600 response so in a recession, I think there's two principles 0:05:46.640 --> 0:05:48.920 that we should be working on. One is we should 0:05:48.920 --> 0:05:52.680 go wide, so that's this idea of giving money to everybody. 0:05:52.720 --> 0:05:55.960 So that's that's covering the breadth. I think it is important, 0:05:55.960 --> 0:05:57.880 and you're going to hear a lot more people talking 0:05:57.920 --> 0:06:02.080 about targeted stimulus. People who get sick right now, people 0:06:02.120 --> 0:06:05.440 who are quarantined, they should get money. They should get 0:06:05.440 --> 0:06:08.000 more money because they're they're the ones that are sick, 0:06:08.040 --> 0:06:11.640 they're they're suffering the most. Give them more because right 0:06:11.640 --> 0:06:14.520 now people are freaking out right because they don't know 0:06:14.640 --> 0:06:17.240 if they are going to get sick. They don't know 0:06:17.240 --> 0:06:22.840 if someone their family is going to get sick. Another 0:06:22.920 --> 0:06:26.080 key point that Claudia brought up was that households have 0:06:26.680 --> 0:06:30.919 very few financial buffers. Even in a wealthy country, a 0:06:30.960 --> 0:06:34.120 lot of households just don't have the money to cover 0:06:34.279 --> 0:06:39.039 emergency expenses. As such, if you give people money, it 0:06:39.120 --> 0:06:42.120 will be spent. There are many people who are one 0:06:42.160 --> 0:06:46.960 paycheck even some cut hours away from serious financial distress. 0:06:47.760 --> 0:06:51.000 So if you know that about yourself, and you don't 0:06:51.000 --> 0:06:52.680 know if you're going to get the virus, and you 0:06:52.720 --> 0:06:54.479 don't know if you're gonna be out for two weeks 0:06:54.480 --> 0:06:56.880 from work and you won't get paid if you're out, 0:06:57.600 --> 0:06:59.800 then you're not going to go out and buy like 0:07:00.640 --> 0:07:04.920 the new washing machine, or put the offer on the house, 0:07:05.400 --> 0:07:08.039 or you know, by go out to the rush. There's 0:07:08.080 --> 0:07:09.720 just so many things that you'll do right now to 0:07:09.800 --> 0:07:14.800 cut back because you don't know if Americans across the 0:07:14.840 --> 0:07:18.440 country do that all at once in the next couple 0:07:18.480 --> 0:07:21.240 of months. That's how you take an economy with a 0:07:21.320 --> 0:07:25.360 three and a half percent unemployment rate, really solid GDP 0:07:25.480 --> 0:07:28.240 growth and turn it into a recession because like that, 0:07:28.320 --> 0:07:31.800 once that dynamic gets going, it doesn't matter how much 0:07:31.800 --> 0:07:34.400 you give to the like you know, five percent of 0:07:34.440 --> 0:07:39.040 the population that becomes severely ill, we could get past 0:07:39.080 --> 0:07:42.560 the virus itself and have the economy already be into 0:07:42.600 --> 0:07:46.400 a tailspin that you can't then arrest as easily as 0:07:46.440 --> 0:07:49.920 you could. Right now, we do not have a good 0:07:49.920 --> 0:07:54.440 safety net. We do not have financial buffers, Like a 0:07:54.520 --> 0:07:58.960 huge fraction of US households do not have a paychecks worth, 0:07:59.560 --> 0:08:02.640 let a own like five worth of money just sitting 0:08:02.640 --> 0:08:06.800 around that they can access quickly. And finally, one of 0:08:06.840 --> 0:08:10.600 the questions in the stimulus bill is how widely the 0:08:10.640 --> 0:08:13.480 money should go. Should it go to everyone, should it 0:08:13.560 --> 0:08:16.800 just go to people in affected industries? Should it just 0:08:16.840 --> 0:08:20.280 go to people who have been laid off. Claudia argues 0:08:20.320 --> 0:08:24.120 that the money should go Why I advocate for this 0:08:24.240 --> 0:08:27.920 going wide and giving everyone money not because I think 0:08:28.040 --> 0:08:31.880 everyone needs five Okay, I do it because I think 0:08:31.880 --> 0:08:34.200 that's something you can do the fastest, and I think 0:08:34.200 --> 0:08:37.880 it's the most politically feasible. I mean, nothing is really 0:08:37.880 --> 0:08:39.880 politically feasible right now. But it feels to me like 0:08:39.960 --> 0:08:45.760 that is because everybody gets it. Once you get into targeting, unemployment, insurance, 0:08:45.800 --> 0:08:48.640 food stamps, any of these are a good example, there 0:08:48.640 --> 0:08:53.600 can be this feeling of well, I saved up, I 0:08:53.760 --> 0:08:56.280 worked hard so that when there was a tough time 0:08:56.320 --> 0:08:58.480 in my life, I didn't have to go get food stamps. 0:08:58.960 --> 0:09:01.480 Why should I, as a taxpayer, pay for somebody else 0:09:01.520 --> 0:09:03.480 to go get food stamps when I know they were out, 0:09:03.520 --> 0:09:06.120 you know, god, taking their kids out to dinner before 0:09:06.160 --> 0:09:09.040 they you know, got laid off. And then on top 0:09:09.120 --> 0:09:13.240 of that, there is research, there is incredibly good research 0:09:13.320 --> 0:09:15.320 from the two thousand one tax rebates and the two 0:09:15.640 --> 0:09:19.040 eight stimulus payments that says people will spend it. But 0:09:19.040 --> 0:09:21.199 but this this trope will not go away. I was 0:09:21.200 --> 0:09:23.480 talking to someone who's been a lot of conversations with 0:09:24.360 --> 0:09:28.200 Republican economic staff, and time and again they say, well, 0:09:28.200 --> 0:09:30.480 but they're just going to save it. But there are 0:09:30.520 --> 0:09:34.319 a lot of US households that they keep their spending 0:09:34.320 --> 0:09:37.720 and their income really closely tied, and a lot of 0:09:37.760 --> 0:09:39.959 them like they don't have a lot of income, right, 0:09:40.480 --> 0:09:42.959 I mean, wage growth has not been good. Like if 0:09:43.000 --> 0:09:45.719 you give them money, they will spend it. So I 0:09:45.760 --> 0:09:49.040 think there's this aspect of if we make sure that 0:09:49.120 --> 0:09:52.400 everybody knows we the government is here, we're going to 0:09:52.520 --> 0:09:55.360 help all of you, then it might give some space 0:09:55.440 --> 0:09:57.319 to be like, Okay, well, now that we've helped everybody, 0:09:57.360 --> 0:10:00.840 we really do need to especially help those who hit hard. 0:10:14.880 --> 0:10:18.320 To listen to Joe's full interview with Claudia Sam, download 0:10:18.360 --> 0:10:21.440 the March twelfth episode of Odd Lots and subscribe to 0:10:21.440 --> 0:10:23.880 the show for more of the stories behind the markets. 0:10:25.800 --> 0:10:29.360 And that's it for the Prognosis Daily edition. For more 0:10:29.440 --> 0:10:32.160 on the coronavirus crisis from a hundred and twenty bureaus 0:10:32.200 --> 0:10:37.640 around the world, visit Bloomberg dot com slash coronavirus. If 0:10:37.640 --> 0:10:40.480 you appreciate the podcast, please take a moment to rate 0:10:40.559 --> 0:10:43.280 us and leave us a review on Apple Podcasts or 0:10:43.360 --> 0:10:48.360 Spotify to help more listeners find our global reporting. The 0:10:48.400 --> 0:10:52.680 Prognosis Daily Edition is hosted by Me Laura Carlson. The 0:10:52.720 --> 0:10:56.720 show is produced by Me Tophor foreheads Jordan Gaspoure and 0:10:56.840 --> 0:11:02.760 Magnus Hendrickson. Reporting by Joe Wisenhal. Original music by Leo Sidrin. 0:11:03.520 --> 0:11:07.960 Our editors are Francesca Levi and Rick Shine. Francesca Levi 0:11:08.280 --> 0:11:11.559 is Bloomberg's head of podcasts. Thanks for listening.