The Case For Writing Every American a Check

six point six five million last week. That level was unimaginable just a month ago, as state shutdown commerce to prevent the deadly coronavirus from spreading. The weekly jobless claims have been among the first detailed figures to show the devastating hit to the U S economy. There will be more unprecedented economic indicators to come. New York's coronavirus outbreak shows no sign of abating, with almost seven hundred new infections and more than four hundred new deaths, according to

Governor Andrew Cuomo. Cuomo said at the current infection rate, the state is six days away from exhausting its stockpile of mechanical ventilators. Across the country, states Demands from masks, gloves, face shields, and even body bags to help deal with the coronavirus pandemic far outstrips the federal government's ability to respond. This was according to documents released Thursday by the House Oversight Committee, and the Democratic Convention became the latest major

US event to announce a coronavirus related delay. The Democratic National Committee postponed the presidential nominating convention from July to August seventeen. Spain reported an increase in coronavirus deaths and new cases. Even the country's severe containment measures have yet to bring the outbreak under control. The country's health ministry recorded its deadliest day on Thursday, with nine hundred and fifty fatalities, lifting the total to more than ten thousand

in Italy, the country worst hit in Europe. Some signs show the containment measures may be starting to work. New infections slowed on Thursday, while the number of deaths rose slightly. Now to today's main story, the economic theory behind giving money to everyone in a crisis. Last Friday, US President Donald Trump signed a two trillion dollars stimulus package into law. Under the bill, the US government will make direct payments to Americans to help offset the financial hardships the pandemic

has caused. Giving everybody money with no strings attached has an obvious benefit in an economic emergency, but some economists have been proponents of doing something like this even in a good economy. What's the theory behind handing out money? Should everyone get the same amount? Not everyone agrees. Bloomberg's Joe Wisenthal recently spoke to economist Claudius Som on the Odd Lots podcast to understand how distributing direct payments works.

On Friday March, the U S House of Representatives past the largest aid measure in American history, of two trillion dollars stimulus package that President Donald Trump signed until after days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic. The bipartisan Karasak will squarely address each of the four big priorities that I laid out in my legislation at the

beginning of the process about a week ago. It will rush financial assistance to Americans through direct checks to households from the middle class on down, and through a significant and creative expansion of unemployment insurance during this emergency, it will deliver historic Under the stimulus package, direct payments will be made to Americans to help offset the financial hardships that have resulted from the coronavirus pandemic. That number could

be as high as fift dollar per person. Well, what are the arguments for and against this movie? A few weeks ago, prior to the initial jobless claim soaring and the overwhelming evidence that the US was heading into a deep recession, if not a depression, my colleague Tracy Elloway and I had the luxury of talking with Claudia Song. Claudia is the director of macroeconomic Policy at the Center for Equitable Growth, and she is an expert on what

it takes to prevent a recession. I wanted to bring in some of Claudia's thoughts about what she thought was necessary, and so for this first segment, she discussed the importance of just giving people money. Why you need to just hand people checks from the government in order to stave off a recession. So when I talk about this fiscal response so in a recession, I think there's two principles that we should be working on. One is we should go wide, so that's this idea of giving money to everybody.

So that's that's covering the breadth. I think it is important, and you're going to hear a lot more people talking about targeted stimulus. People who get sick right now, people who are quarantined, they should get money. They should get more money because they're they're the ones that are sick, they're they're suffering the most. Give them more because right now people are freaking out right because they don't know if they are going to get sick. They don't know

if someone their family is going to get sick. Another key point that Claudia brought up was that households have very few financial buffers. Even in a wealthy country, a lot of households just don't have the money to cover emergency expenses. As such, if you give people money, it will be spent. There are many people who are one paycheck even some cut hours away from serious financial distress.

So if you know that about yourself, and you don't know if you're going to get the virus, and you don't know if you're gonna be out for two weeks from work and you won't get paid if you're out, then you're not going to go out and buy like the new washing machine, or put the offer on the house, or you know, by go out to the rush. There's just so many things that you'll do right now to cut back because you don't know if Americans across the country do that all at once in the next couple

of months. That's how you take an economy with a three and a half percent unemployment rate, really solid GDP growth and turn it into a recession because like that, once that dynamic gets going, it doesn't matter how much you give to the like you know, five percent of the population that becomes severely ill, we could get past the virus itself and have the economy already be into a tailspin that you can't then arrest as easily as you could. Right now, we do not have a good

safety net. We do not have financial buffers, Like a huge fraction of US households do not have a paychecks worth, let a own like five worth of money just sitting around that they can access quickly. And finally, one of the questions in the stimulus bill is how widely the money should go. Should it go to everyone, should it just go to people in affected industries? Should it just

go to people who have been laid off. Claudia argues that the money should go Why I advocate for this going wide and giving everyone money not because I think everyone needs five Okay, I do it because I think that's something you can do the fastest, and I think it's the most politically feasible. I mean, nothing is really politically feasible right now. But it feels to me like

that is because everybody gets it. Once you get into targeting, unemployment, insurance, food stamps, any of these are a good example, there can be this feeling of well, I saved up, I worked hard so that when there was a tough time in my life, I didn't have to go get food stamps. Why should I, as a taxpayer, pay for somebody else to go get food stamps when I know they were out, you know, god, taking their kids out to dinner before

they you know, got laid off. And then on top of that, there is research, there is incredibly good research from the two thousand one tax rebates and the two eight stimulus payments that says people will spend it. But but this this trope will not go away. I was talking to someone who's been a lot of conversations with Republican economic staff, and time and again they say, well,

but they're just going to save it. But there are a lot of US households that they keep their spending and their income really closely tied, and a lot of them like they don't have a lot of income, right, I mean, wage growth has not been good. Like if

you give them money, they will spend it. So I think there's this aspect of if we make sure that everybody knows we the government is here, we're going to help all of you, then it might give some space to be like, Okay, well, now that we've helped everybody, we really do need to especially help those who hit hard. To listen to Joe's full interview with Claudia Sam, download the March twelfth episode of Odd Lots and subscribe to the show for more of the stories behind the markets.

And that's it for the Prognosis Daily edition. For more on the coronavirus crisis from a hundred and twenty bureaus around the world, visit Bloomberg dot com slash coronavirus. If you appreciate the podcast, please take a moment to rate us and leave us a review on Apple Podcasts or Spotify to help more listeners find our global reporting. The Prognosis Daily Edition is hosted by Me Laura Carlson. The show is produced by Me Tophor foreheads Jordan Gaspoure and

Magnus Hendrickson. Reporting by Joe Wisenhal. Original music by Leo Sidrin. Our editors are Francesca Levi and Rick Shine. Francesca Levi is Bloomberg's head of podcasts. Thanks for listening.