A strong recovery requires immediate relief coupled with long-term investment
pic by BLOOMBERG
NEVER before has a public-health emergency created such widespread economic paralysis. As government officials work to slow the spread of the coronavirus, treat the afflicted, and save lives, it is essential that Congress and the president take immediate actions to stabilise a dangerously teetering economy and lay the groundwork for long-term recovery.
The relief bill spearheaded by House Speaker Nancy Pelosi and signed into law by President Donald Trump on Wednesday was an important first step in helping American workers hit hard by the crisis. Its main provisions — including creating temporary paid leave for many workers, extending unemployment insurance, and providing more funding for food stamps and children’s health insurance — will strengthen the nation’s social safety net.
But, that must only be the start. All over the US, small and large businesses are closing their doors, and as they do, they are drawing down their lines of credit to pay their bills. Getting them help now is absolutely urgent — both for their survival, and to protect the financial system from the shock that is sure to come.
In 2008, Congress gave the administration and Federal Reserve authority to prevent a financial crisis from becoming an economy-wide catastrophe. Now, it must extend the same kinds of authority to prevent an economy-wide catastrophe from undermining the financial system that is essential to recovery.
Those emergency powers were wielded effectively by the Bush and Obama administrations, including using an exchange stabilisation fund to guarantee money market funds, protecting millions of individual investors and ensuring that there is a market for businesses to issue commercial paper. Today, Congress must again move swiftly to give the administration the emergency powers that may prove necessary to hold the financial system and economy together.
Stabilising the economy now and helping businesses survive must be priority number one. But providing immediate relief shouldn’t be the only strategy for achieving those goals.
In the months ahead, when the public-health emergency slows and hopefully passes, one of the fundamental obstacles to restoring economic growth will be public uncertainty. Consumers will not resume spending, businesses will not rehire workers and investors will not leave safe havens until they are confident that we are on the road to recovery. In other words, the economic crisis that American communities will experience could far outlast the public-health emergency — unless Washington takes decisive action now to lay the foundation for recovery.
Delay will only prolong the pain. But swift action — by giving both markets and main-street businesses something positive to look forward to — can stanch some of the losses now and speed the recovery later, so that we emerge from this crisis a stronger nation.
One of the best ways to restore faith in the economy when the public-health emergency abates would be to ensure that it coincides with the largest public investment in infrastructure in generations. I know from my time as mayor of New York that public investment in infrastructure is a highly effective way to increase private-sector investment and business activity — and inspire confidence in the future.
At the same time, an infrastructure bill is a chance to build the clean-energy economy our country needs — and to create the jobs necessary to do it. The bill should include major new investments in wind and solar power, a national transmission grid, energy efficiency for buildings and the electric-vehicle manufacturing industry, which will benefit US automakers. Those investments will create millions of new jobs, including for many Americans who lose work in the oil, gas and coal industries.
If Congress passes a major infrastructure and clean-energy bill before the April recess, shovels can start hitting the ground when workers, businesses and investors are looking for signs of hope, indications of growth and reasons to believe that the worst has passed.
And while it can take years to complete a project, the act of investment — and putting people to work — sends exactly the kind of signal to the marketplace that our country will need. In my campaign for president, I outlined a comprehensive plan for repairing America’s existing infrastructure — 47,000 bridges and 2,000 dams require critical repairs, for starters — and modernising it to reduce traffic congestion, cut pollution and carbon emissions, improve resiliency and spur new economic opportunity, including by extending broadband to communities that don’t have it.
These kinds of investments were badly needed before the Covid-19 began laying waste to our economy. Now, they are absolutely imperative. And while they will not be a cure-all — none exists — they will help restore faith in the future of the country at a time when we will badly need it.
We have seen this strategy work before. In 1933, President Franklin D Roosevelt — himself diagnosed with polio, an epidemic that also led to closures of public facilities — declared, “The only thing we have to fear is fear itself.” We have come to think of that famous utterance as referring to public fears about the Great Depression generally. But in fact, Roosevelt was referring to a specific kind of fear: The “nameless, unreasoning, unjustified terror which paralyses needed efforts to convert retreat into advance”.
In the 100 days that followed, Congress heeded Roosevelt’s call and began converting retreat into advance. Now it’s time to do it again. — Bloomberg
The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.