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Coronavirus Chaos

Does the U.S. Economy Need Another Shot of Stimulus?

Joe Biden Speech
CUNY Foreign Policy Speech - New York, NY - July 11, 2019

Where is the U.S. economy headed now that many governors are reimposing stricter COVID-19 safety protocols now that cases are spiking nationwide? I spoke to acclaimed economist Milton Ezrati to get his take on where all of this might be headed. Our conversation is below:

It seems unemployment numbers are not improving at the clip of what was hoped for back in the summer when we saw better rates of economic growth. Do you see unemployment figures going back up due to more COVID-19 restrictions?

With restrictions in some places moving toward former levels of severity, we will see employment fall again and the unemployment rates rise again.

How far will depend on the geographic extent and severity of the restrictions. If the nation imposes a regime as severe as last spring, the unemployment rate could easily rise toward 15% again, though I doubt the public would stand for restrictions on that level.

While there does not seem to be a lot of momentum for a new stimulus plan (although that might change), many of the stimulus measures meant to help Americans—specifically, a halt on payments on federal student loans—will expire soon. What will the impact be? If another stimulus does get passed would you recommend another student loan suspension?

Certainly, as the help offered by the CARES legislation runs its course, the economy will suffer, though I doubt we’d see an outright economic decline unless we also impose new lockdowns and quarantines.

If Washington can get its act together for another stimulus package, suspensions in the payments of student loans should be a part of that, along with a renewed effort along the lines of the PPP in CARES. Help for cities and states needs conditions placed on it or it would feed profligacy.

Speaking of a stimulus, and considering the fact that COVID-19 case numbers keep getting worse and worse, what would be the best measures lawmakers should try to pass? What would be the best way to stimulate the economy? 

The virus is clearly a problem, but it is not the economy’s problem.

It is the lockdowns and quarantines that hurt the economy. Widespread vaccinations and targeted programs for the vulnerable would allow the country to deal with the virus without severe economic restrictions. Support for that effort ought to be in any program. Other than that, such a program should focus on measures like the PPP to businesses bridge the period of restrictions.  It should also provide help for out of work individuals but not so generous that they lose the desire to return to work.

It seems a vaccine—or multiple vaccines—could hit the U.S. next month. What will the economic impact be for 2021? Could the economy boom or will people still be worried to resume what life was like pre-COVID? 

Vaccines, by obviating the need for lockdowns and quarantines can only help the economy.

We’ve already seen the snapback from the severe restrictions of last spring, so a slower rate of recovery than we saw last summer is in the cards even if we get a vaccine distributed widely.

Even then it will take time, I guess into 2022, for people to shed the habits of fear they have developed in this pandemic and return entirely to their pre-Covid lifestyles and ways of doing business.

Written By

Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and chief economist for Vested, the New York-based communications firm. His latest book is Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live.