The starting point for all of what follows is that government, if it has the will to act, is currently in the driver’s seat. Much of the private sector is facing a terrifying confluence of crunches: supply breakdowns, demand falling off a cliff for many goods and services, and a looming shortfall of liquidity to service debt. A wide swath of business is on the ropes and needs a rescue from government. This puts the power in our hands if we can wield it. Of course, with Republican dominance in Washington and the continued loyalty of the Democratic Party to the liberal wing of the plutocracy, the likelihood that we will take advantage of this moment is small. Still, the opportunity is there, and that’s the basis for thinking ambitiously.
1. Debt-equity buyouts. There’s a lot of business debt, and borrowers face a crisis as their earnings tumble. Andrew Ross Sorkin proposes a scheme in which the government would offer no-interest bridge loans to any and all comers, with repayment delayed until after the immediate crisis abates. The key condition, and just about the only one, is that recipients commit to retaining 90% of their pre-virus workforce. Dean Baker would go further and provide direct bailout support in exchange for quid pro quo’s, like zeroing out shareholders and limiting CEO pay.
Here is another idea. Have the government offer to purchase any and all outstanding corporate debt, converting it into an equity stake. Wipe the debt off the books and take a public ownership position instead, which could be used to pursue objectives, like cutting pay at the top and expanding worker benefits, that the vast majority of Americans support.
2. Public voucher purchases. For the small business and self-employed sector, particularly in services, I like the Saez-Zucman idea of having the government serve as buyer of last resort. Specifically, I would set up a public fund to enable the government—perhaps at state and local levels—purchase vouchers for future goods. A massage therapist, for example, could sell a quantity of vouchers for future massage sessions, providing an income stream to make it through the quarantine. When the crisis recedes, the government would distribute these vouchers to the public, either through a highly discounted sale or even free distribution. Perhaps the vouchers could be for steep discounts, say 80%, off the posted price to all for a bit of post-virus income as well.
3. Medicare for All. Free testing and treatment for coronavirus should be instituted universally and immediately. But there is plenty of evidence that comorbidity and -mortality is a big problem: the virus especially endangers victims who have other conditions, which means that expedited treatment of respiratory, cardiovascular and other diseases should also be on the agenda. Ultimately, any argument for saving lives in the face of the coronavirus can be made for saving lives from other risks, so public payment for all significant health expenses and not just the coronavirus should be on the table.
4. Revenue sharing. After decades of fiscal constriction, state and local governments have been stretched to the bone. This has become apparent in the current crisis, with the limited surge capacity of local health and other services. On top of this we are certainly going to see a plunge in revenues as the economy freezes up. Only the federal government can borrow freely, backed by the bond-purchasing power of the Fed. This means it is the responsibility of Washington to backstop the states and lower jurisdictions, so services can be maintained or expanded as needed.
5. Paid leave. The equivocations of Congress on this front are shameful. All workers who are unable to go to work, whether because of an illness in the family, lack of school for their kids, the suspension of public transportation or any other health-related reason, should receive this benefit, no matter how large or small their employer.
6. Expanded unemployment. The US has one of the weakest unemployment insurance systems in the developed world, regularly reimbursing less than half the income of less than half the unemployed. Now is the time to bring America up to code.
7. Fee and dividend: pay it forward. Cash payments to the public are already planned, and much of the debate is about their size. Here is a different approach. If we are serious about climate change, we will have to adopt a program to limit carbon emissions as soon as possible. There are only two ways to do this, a tax on them or a system in which a permit is required to bring fossil energy into the economy. If the permits are auctioned off, as they need to be, either option will result in a flow of carbon money from the public to the government. (I’m strongly in favor of the permit approach, but that’s a story for another day.) The best thinking on this issue points to the strong desirability of returning this money back to the public in the form of an equal per capita rebate.
So why not begin setting up this system now, but start the rebate immediately while phasing in the carbon pricing a year or so later to provide a financial injection? One recent study found (by extrapolation) that a $100 per metric ton carbon price would generate over $800 in annual rebates to each citizen of the US. For a household of four this would mean more than $3200 per year. Why not simply transfer this amount to each of us now as a way to introduce the full program? (I realize that excluding non-citizens is a problem, but the specifics of how to address it would take us too far into the weeds right now.)
8. Coordinated renter/homeowner support. We are seeing many local and state-level initiatives to prohibit eviction of renters during the current crunch, and this should be extended nationwide. At the same time, if renters are temporarily released from the obligation to pay rent but noncommercial landlords, like families that rent out a flat so their home can be affordable, are held to every penny of their mortgage, a crisis ensues—one that isn’t in the interest of either renter or owner. It’s important, then, for measures to protect renters to be accompanied by similar measures to suspend or reduce mortgage payments. This can be done only at the national level. In fact, mortgage relief was originally intended to be a component of the post-2008 stimulus program, but it was never taken seriously by either political party. This time around we should make up for past errors.
This is what occurs to me after a day of reading virus commentary.