In a new brief, Roosevelt’s chief economist explains why targeted federal assistance is crucial to preventing a deeper and more lasting economic downturn
Six months after the $2.2 trillion CARES Act, the evidence is unmistakable: The economic and health effects of COVID-19 have persisted far longer than most policymakers anticipated. Questions still remain about how long and how deep this downturn will be and how much economic and social devastation it will bring. But to prevent the inequality of a K-shaped recovery, the federal government must provide targeted assistance to unemployed people, hard-hit sectors (like education and health care), and small businesses struggling with the unique uncertainty of the COVID-19 recession.
In a new brief, The Economy of Tomorrow: Recovering and Restructuring after COVID-19, Roosevelt Institute chief economist and Columbia University professor Joseph E. Stiglitz describes what we know about the economy today, and what we need to do next. The paper begins with key lessons from prior economic downturns, moves to what is distinct about this crisis, and ends with policy recommendations.
“One of the lessons of previous crises is that without early and sustained fiscal support, commensurate in size with the shock the economy has experienced, recovery will be anemic,” said Stiglitz. “Today’s preparations for a post-pandemic world can also yield more lasting improvements in our economy—but only if our policy response is well-designed, sustained, and targeted at people and sectors with the most need.”
Stiglitz further argues that well-designed assistance should include:
- Support for state and local governments and sectors needing the most help, such as education, and health care;
- Continued unemployment benefits, loans, and direct employment for workers;
- Targeted support to enhance the liquidity of the most-affected and least well-off businesses and individuals; and
- Pandemic-contingent government support, where repayment is conditioned on the course of the pandemic.
“Some have worried that increased public indebtedness as a result of these continuing government expenditures will offset the expansionary effect of the increased spending, and others fear that the monetization of the debt will lead to inflation. Neither fear is justified,” said Stiglitz. “What we should really fear is the enormous cost of inaction, which would cause both short-term and long-term harm. In fact, the increase in federal indebtedness will not have adverse effects on consumption or investment, and this is especially so if the government programs are well-designed.”
For the economy to successfully recover from COVID-19, the Roosevelt Institute believes, we must enact progressive policies—centered on racial and gender equality—that provide immediate economic relief and long-term structural change. Only then can we achieve a more equitable 21st-century economy and society.
You can learn more about how the Roosevelt Institute is working to build an inclusive economy in the COVID-19 era here.
About the Roosevelt Institute
The Roosevelt Institute is a think tank, a student network, and the nonprofit partner to the Franklin D. Roosevelt Presidential Library and Museum that, together, are learning from the past and working to redefine the future of the American economy. Focusing on corporate and public power, labor and wages, and the economics of race and gender inequality, the Roosevelt Institute unifies experts, invests in young leaders, and advances progressive policies that bring the legacy of Franklin and Eleanor into the 21st century.
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