A former chair of the Council of Economic Advisers during the 2008 financial crisis under President Obama is urging Congress to provide a strong rescue package – including a one-time payment of $1,000 to every American adult and $500 for every child – to help cope with the fallout of the coronavirus, a report said.
Jason Furman, currently a professor at Harvard University, spoke with NBC News about the ongoing situation and how the federal government might steady the economy.
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Furman told the network the economic aspect of the disease is "very serious," and perhaps more serious than the 2008 crisis.
He said in 2008, millions of people lost their jobs, but most people kept their jobs, while many people maintained their consumption, he said.
“In this case, everyone is cutting their spending and lots of people, even if they don’t lose their jobs, will lose time at work, hours, tips, potentially a large blow to their income,” Furman said.
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“The financial crisis occurred because the underpinning of the economy was bad, they say, but this is a temporary situation and eventually things will go back to normal,” he added.
Furman was quick to concede if the virus recedes in the next two months, he won’t be too worried about the economy. However, he said, after speaking to professionals, the feeling “is that it is not realistic to expect it to go away in two months, and that if it did, it could come back even more virulently again in the flu season next year.”
Should the coronavirus last more than a few months, it then takes on its own momentum, NBC News reported.
“If you look across the United States and across other countries, the unemployment rate can go up very quickly, but it can’t come back down very quickly. It never has. A business whose balance sheet is in tatters after nine months without revenues might go bankrupt, it might go out of business, or it won’t be in position to hire people back immediately even if demand returns,” Furman said.
The federal government should spend as much as it can on health, on testing, on hospital infrastructure, he added.
“You should spend as much as you can in a targeted way on things like unemployment insurance, nutritional assistance, paid leave, and help for states,” Furman told NBC News.
Once that’s been accomplished, “you’ve maxed out on health and maxed out on targeted assistance, you have two problems: One is millions, or tens of millions, of households are going to be hurting from lower incomes, lost jobs, or time off work,” he said.
“Second, just from a macroeconomic perspective, the amount of stimulus you want for the economy under that scenario is still smaller than what you need,” he added. “The only way to reach everyone you need and get to the size you need is with some broad-based tax transfer.”
Furman estimated the federal government would need to spend about $700 billion to avert the worst impact on the economy.