Speaker 1: Welcome to Prognosis. I'm Laura Carlson. It's day twenty three
Speaker 1: since coronavirus was declared a global pandemic. Today, the government
Speaker 1: has a plan to help Americans struggling because of COVID
Speaker 1: nineteen by sending them direct checks, but some economists have
Speaker 1: always advocated for handing out money to nearly everyone in
Speaker 1: good times and bad. But first today's news. The number
Speaker 1: of Americans applying for unemployment benefits surged to a record
Speaker 1: six point six five million last week. That level was
Speaker 1: unimaginable just a month ago, as state shutdown commerce to
Speaker 1: prevent the deadly coronavirus from spreading. The weekly jobless claims
Speaker 1: have been among the first detailed figures to show the
Speaker 1: devastating hit to the U S economy. There will be
Speaker 1: more unprecedented economic indicators to come. New York's coronavirus outbreak
Speaker 1: shows no sign of abating, with almost seven hundred new
Speaker 1: infections and more than four hundred new deaths, according to
Speaker 1: Governor Andrew Cuomo. Cuomo said at the current infection rate,
Speaker 1: the state is six days away from exhausting its stockpile
Speaker 1: of mechanical ventilators. Across the country, states Demands from masks, gloves,
Speaker 1: face shields, and even body bags to help deal with
Speaker 1: the coronavirus pandemic far outstrips the federal government's ability to respond.
Speaker 1: This was according to documents released Thursday by the House
Speaker 1: Oversight Committee, and the Democratic Convention became the latest major
Speaker 1: US event to announce a coronavirus related delay. The Democratic
Speaker 1: National Committee postponed the presidential nominating convention from July to
Speaker 1: August seventeen. Spain reported an increase in coronavirus deaths and
Speaker 1: new cases. Even the country's severe containment measures have yet
Speaker 1: to bring the outbreak under control. The country's health ministry
Speaker 1: recorded its deadliest day on Thursday, with nine hundred and
Speaker 1: fifty fatalities, lifting the total to more than ten thousand
Speaker 1: in Italy, the country worst hit in Europe. Some signs
Speaker 1: show the containment measures may be starting to work. New
Speaker 1: infections slowed on Thursday, while the number of deaths rose slightly.
Speaker 1: Now to today's main story, the economic theory behind giving
Speaker 1: money to everyone in a crisis. Last Friday, US President
Speaker 1: Donald Trump signed a two trillion dollars stimulus package into law.
Speaker 1: Under the bill, the US government will make direct payments
Speaker 1: to Americans to help offset the financial hardships the pandemic
Speaker 1: has caused. Giving everybody money with no strings attached has
Speaker 1: an obvious benefit in an economic emergency, but some economists
Speaker 1: have been proponents of doing something like this even in
Speaker 1: a good economy. What's the theory behind handing out money?
Speaker 1: Should everyone get the same amount? Not everyone agrees. Bloomberg's
Speaker 1: Joe Wisenthal recently spoke to economist Claudius Som on the
Speaker 1: Odd Lots podcast to understand how distributing direct payments works.
Speaker 1: On Friday March, the U S House of Representatives past
Speaker 1: the largest aid measure in American history, of two trillion
Speaker 1: dollars stimulus package that President Donald Trump signed until after
Speaker 1: days of intense discussions, the Senate has reached a bipartisan
Speaker 1: agreement on a historic relief package for this pandemic. The
Speaker 1: bipartisan Karasak will squarely address each of the four big
Speaker 1: priorities that I laid out in my legislation at the
Speaker 1: beginning of the process about a week ago. It will
Speaker 1: rush financial assistance to Americans through direct checks to households
Speaker 1: from the middle class on down, and through a significant
Speaker 1: and creative expansion of unemployment insurance during this emergency, it
Speaker 1: will deliver historic Under the stimulus package, direct payments will
Speaker 1: be made to Americans to help offset the financial hardships
Speaker 1: that have resulted from the coronavirus pandemic. That number could
Speaker 1: be as high as fift dollar per person. Well, what
Speaker 1: are the arguments for and against this movie? A few
Speaker 1: weeks ago, prior to the initial jobless claim soaring and
Speaker 1: the overwhelming evidence that the US was heading into a
Speaker 1: deep recession, if not a depression, my colleague Tracy Elloway
Speaker 1: and I had the luxury of talking with Claudia Song.
Speaker 1: Claudia is the director of macroeconomic Policy at the Center
Speaker 1: for Equitable Growth, and she is an expert on what
Speaker 1: it takes to prevent a recession. I wanted to bring
Speaker 1: in some of Claudia's thoughts about what she thought was necessary,
Speaker 1: and so for this first segment, she discussed the importance
Speaker 1: of just giving people money. Why you need to just
Speaker 1: hand people checks from the government in order to stave
Speaker 1: off a recession. So when I talk about this fiscal
Speaker 1: response so in a recession, I think there's two principles
Speaker 1: that we should be working on. One is we should
Speaker 1: go wide, so that's this idea of giving money to everybody.
Speaker 1: So that's that's covering the breadth. I think it is important,
Speaker 1: and you're going to hear a lot more people talking
Speaker 1: about targeted stimulus. People who get sick right now, people
Speaker 1: who are quarantined, they should get money. They should get
Speaker 1: more money because they're they're the ones that are sick,
Speaker 1: they're they're suffering the most. Give them more because right
Speaker 1: now people are freaking out right because they don't know
Speaker 1: if they are going to get sick. They don't know
Speaker 1: if someone their family is going to get sick. Another
Speaker 1: key point that Claudia brought up was that households have
Speaker 1: very few financial buffers. Even in a wealthy country, a
Speaker 1: lot of households just don't have the money to cover
Speaker 1: emergency expenses. As such, if you give people money, it
Speaker 1: will be spent. There are many people who are one
Speaker 1: paycheck even some cut hours away from serious financial distress.
Speaker 1: So if you know that about yourself, and you don't
Speaker 1: know if you're going to get the virus, and you
Speaker 1: don't know if you're gonna be out for two weeks
Speaker 1: from work and you won't get paid if you're out,
Speaker 1: then you're not going to go out and buy like
Speaker 1: the new washing machine, or put the offer on the house,
Speaker 1: or you know, by go out to the rush. There's
Speaker 1: just so many things that you'll do right now to
Speaker 1: cut back because you don't know if Americans across the
Speaker 1: country do that all at once in the next couple
Speaker 1: of months. That's how you take an economy with a
Speaker 1: three and a half percent unemployment rate, really solid GDP
Speaker 1: growth and turn it into a recession because like that,
Speaker 1: once that dynamic gets going, it doesn't matter how much
Speaker 1: you give to the like you know, five percent of
Speaker 1: the population that becomes severely ill, we could get past
Speaker 1: the virus itself and have the economy already be into
Speaker 1: a tailspin that you can't then arrest as easily as
Speaker 1: you could. Right now, we do not have a good
Speaker 1: safety net. We do not have financial buffers, Like a
Speaker 1: huge fraction of US households do not have a paychecks worth,
Speaker 1: let a own like five worth of money just sitting
Speaker 1: around that they can access quickly. And finally, one of
Speaker 1: the questions in the stimulus bill is how widely the
Speaker 1: money should go. Should it go to everyone, should it
Speaker 1: just go to people in affected industries? Should it just
Speaker 1: go to people who have been laid off. Claudia argues
Speaker 1: that the money should go Why I advocate for this
Speaker 1: going wide and giving everyone money not because I think
Speaker 1: everyone needs five Okay, I do it because I think
Speaker 1: that's something you can do the fastest, and I think
Speaker 1: it's the most politically feasible. I mean, nothing is really
Speaker 1: politically feasible right now. But it feels to me like
Speaker 1: that is because everybody gets it. Once you get into targeting, unemployment, insurance,
Speaker 1: food stamps, any of these are a good example, there
Speaker 1: can be this feeling of well, I saved up, I
Speaker 1: worked hard so that when there was a tough time
Speaker 1: in my life, I didn't have to go get food stamps.
Speaker 1: Why should I, as a taxpayer, pay for somebody else
Speaker 1: to go get food stamps when I know they were out,
Speaker 1: you know, god, taking their kids out to dinner before
Speaker 1: they you know, got laid off. And then on top
Speaker 1: of that, there is research, there is incredibly good research
Speaker 1: from the two thousand one tax rebates and the two
Speaker 1: eight stimulus payments that says people will spend it. But
Speaker 1: but this this trope will not go away. I was
Speaker 1: talking to someone who's been a lot of conversations with
Speaker 1: Republican economic staff, and time and again they say, well,
Speaker 1: but they're just going to save it. But there are
Speaker 1: a lot of US households that they keep their spending
Speaker 1: and their income really closely tied, and a lot of
Speaker 1: them like they don't have a lot of income, right,
Speaker 1: I mean, wage growth has not been good. Like if
Speaker 1: you give them money, they will spend it. So I
Speaker 1: think there's this aspect of if we make sure that
Speaker 1: everybody knows we the government is here, we're going to
Speaker 1: help all of you, then it might give some space
Speaker 1: to be like, Okay, well, now that we've helped everybody,
Speaker 1: we really do need to especially help those who hit hard.
Speaker 1: To listen to Joe's full interview with Claudia Sam, download
Speaker 1: the March twelfth episode of Odd Lots and subscribe to
Speaker 1: the show for more of the stories behind the markets.
Speaker 1: And that's it for the Prognosis Daily edition. For more
Speaker 1: on the coronavirus crisis from a hundred and twenty bureaus
Speaker 1: around the world, visit Bloomberg dot com slash coronavirus. If
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Speaker 1: Prognosis Daily Edition is hosted by Me Laura Carlson. The
Speaker 1: show is produced by Me Tophor foreheads Jordan Gaspoure and
Speaker 1: Magnus Hendrickson. Reporting by Joe Wisenhal. Original music by Leo Sidrin.
Speaker 1: Our editors are Francesca Levi and Rick Shine. Francesca Levi
Speaker 1: is Bloomberg's head of podcasts. Thanks for listening.