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.