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On Tuesday, Wall Street recouped some of Monday’s record losses, with the Dow Jones Industrial Average regaining 1,000 points in apparent reaction to the prospect of a major economic stimulus package. How would that help Americans reeling from the pandemic? Harvard University economist Jason Furman, who worked for the Obama administration after the financial crisis, discusses with Judy Woodruff.
Now the talk of federal aid for an ailing economy.
It came today as Wall Street recouped some of Monday's record losses. The Dow Jones industrial average gained back 1,000 points, to close at 21237. The Nasdaq rose 430 points, and the S&P 500 added 143.
Much of the market's reaction was because of the prospect for a major stimulus package, including the idea of potentially giving Americans as much as $1,000 apiece.
Jason Furman is an economist who worked for the Obama administration after the financial collapse. He's now a professor at Harvard University who advocated for that basic idea.
And he joins me now from Massachusetts via Skype.
Jason Furman, thank you so much for being with us.
First of all, in your view, is the Trump administration identifying correctly what the needs are in this economy right now?
I think today was a really important step in identifying those needs.
They're understanding that we need to act in a way that's really big, that is really fast, and that gets money directly to the families that are going to be most affected by everything that's happened.
So, there's more I'd like to see, but I thought today was a very important step.
So, they're talking about $850 billion, although Treasury Secretary Mnuchin later threw out the number $1 trillion, including, as you mentioned, that $1,000 per individual.
Why is that, in your mind, a good idea?
The economy is going to go through the largest dislocation it perhaps has ever gone through. It's as if you simultaneously have hurricanes hitting every part of the country and every part of the global economy simultaneously.
Lots of people are going to lose money as a result of this. It would be great if we could go out and find exactly who those people were and compensate them, but that's just a really hard thing to do. And so what they have chose on the do, and I have advocated, is to paint with a broad brush, make sure you're not missing everyone, and get as much money out there in the pockets of families as we can.
For some families, $1,000 is going to be a lot of money. For others, it's not going to mark much of a difference. Why is that the right number?
I think $1,000 a person, $500 a child.
So, if you're family of four, you would get $3,000.
I think it should happen again if it's needed. If the unemployment rate goes up, if the employment rate goes down, then there should be another round of checks. I think that should be automatic in the legislation.
And, finally, I think there's a lot of other channels the federal government has to get money to families that need it. It should be using them, in addition to this, expanding unemployment insurance, expanding nutritional assistance, expanding assistance to the states for Medicaid.
None of those were in the White House package, and all of those are essential complements to the ideas they have been talking about.
Jason Furman, as you know, there is also talk of tax cuts.
The president in particular has expressed a strong interest in the payroll tax cut. That is not in the plan right now. What's your opinion of that?
I think a payroll tack cut in the best of times is a suboptimal policy. It gives a lot to people that make a lot of money, less to people that don't.
I think, right now, it would be a crazy policy, because it gives nothing to people who aren't getting payroll. And it tells you, if you want to get this money, you have to stay at your job. And I don't think either of those are the right messages for this moment in time.
And it appears that the White House has wisely shelved that misguided idea.
What do you see as the businesses that are going to need the most assistance? We hear the administration talking about helping the airlines, helping the tourist industry.
Where do you see that need most legitimately should go?
Look, there's a lot of businesses they didn't make a mistake in business decision. They were just hit with something huge.
The government is having to shut lots of things down, absolutely appropriately, for the sake of our health, but that has a lot of damage. And so I think some degree of loans and compensation for all of that is appropriate.
Airlines, hospitality, mass transit, by the way, has been hit very hard by this. I think they need help as well. And then I would include small and medium-sized businesses all across the country.
Do you see what we're talking about now as the extent of what is ultimately going to be needed? What more could be done, because we're facing the great unknown right now?
Yes, I think it's a very open question how long the essential shutdown of much of America lasts.
If it last more than two or three months, I think it could have prolonged consequences for the economy. Historically, unemployment rates can go up very quickly. They never go down very quickly. A business that goes bankrupt can do that quickly. Going un-bankrupt is not something that you can do.
So I am worried not just about the next phase, where we particularly need to help families, but also, as we get beyond this phase, making sure the economy is in a position to rebound, because I don't think it can do that all on its own.
Jason Furman, professor at Harvard University, thank you so much.
Thanks for having me.
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