A former adviser to President Obama says the federal government should give $1,000 to every American adult and $500 to every child.
There are 320 million people in the U.S., of which about 75 million are children. That means the one-time payments would cost more than $282 billion.
Jason Furman, the former chairman of the Council of Economic Advisers during the 2008 financial crisis under Obama, told NBC News that the coronavirus now spreading across the U.S. could have a more serious financial impact than the 2008 crash.
“In this case, everyone is cutting their spending and lots of people, even if they don’t lose their jobs, will lose time at work, hours, tips, potentially a large blow to their income,” Furman said.
“The financial crisis occurred because the underpinning of the economy was bad, they say, but this is a temporary situation and eventually things will go back to normal,” said Furman, currently a professor at Harvard University.
Furman said that if the virus slows in two months — as it is doing now in China — the U.S. economy could survive. But he said that experts say “it is not realistic to expect it to go away in two months, and that if it did, it could come back even more virulently again in the flu season next year.”
State governments are ordering the closure of businesses like restaurants and bars and mandating that no gatherings more than 50 or 100 people be allowed, which will have a devastating effect on the economy. If businesses are forced to shut down for months, the unemployment rate will surely rise.
“If you look across the United States and across other countries, the unemployment rate can go up very quickly, but it can’t come back down very quickly. It never has. A business whose balance sheet is in tatters after nine months without revenues might go bankrupt, it might go out of business, or it won’t be in position to hire people back immediately even if demand returns,” Furman said.
The federal government, he said, will have to pay one way or the other.
“You should spend as much as you can in a targeted way on things like unemployment insurance, nutritional assistance, paid leave, and help for states,” Furman said.
Even if that happens, Furman said then “you’ve maxed out on health and maxed out on targeted assistance, you have two problems: One is millions, or tens of millions, of households are going to be hurting from lower incomes, lost jobs, or time off work,” he said.
“Second, just from a macroeconomic perspective, the amount of stimulus you want for the economy under that scenario is still smaller than what you need,” he added. “The only way to reach everyone you need and get to the size you need is with some broad-based tax transfer.”
In all, Furman said the federal government could need to spend about $700 billion to avert another economic crisis in the U.S.
Stocks fell sharply again on Monday, with the S&P 500 dropping 11.4% and the Dow Jones Industrial Average falling 2,700 points, or 11.7%. The Nasdaq Composite traded 11.2% lower.