Three Bold Economic Proposals for Virus Response
“Make no little plans; they have no magic to stir men’s blood.” Legendary Chicago architect and urban planner Daniel Burnham used those words more than a century ago to exhort a post-fire Chicago toward great renewal. His compelling words, combined with the action of a key builder, spurred the remarkable recovery of a city, from ashes to skyscrapers.
In a similar way, if President Trump boldly confronts the economic challenges of the global virus calamity, he will stimulate a swift renewal in every city and hamlet in America once this health crisis abates. No one could foresee such a growth-stifling blow to the world -- not Donald Trump, not travel industry CEOs, and surely not line workers at now-shuttered stores, restaurants, and myriad other engines of American economic output. But we must deal with the situation as it is, and deal resolutely and forcefully. In terms of fiscal measures, far better to temporarily overreact rather than to underwhelm.
Why? Partly because confidence remains critical to prosperity. Belief begets belief. As optimism spurs buying, investing, and hiring, a virtuous cycle commences, which then encourages more of the same.
Although the Federal Reserve cut interest rates to near 0%, such measures will not change the on-the-ground reality of a collapse in demand from quarantined consumers. Similarly, calls for large-scale government purchases of stocks or corporate debt might reward institutions, but will fail to stabilize our most vulnerable working-class citizens. So, Mr. President, think big, and push these three proposals to the Congress:
Income Tax Suspension for Middle/Lower Brackets: Cutting the payroll tax is a good start, but it is not nearly enough. For all but the highest income brackets, there should be zero federal taxes collected for an indefinite time. Give the secretary of the Treasury (or even the Federal Reserve chair) control over when regular tax rates resume. For the time being, give every working-class American a substantial raise by suspending taxes. Rather than having government engage in industrial policy to try to determine where money should flow, let the workers decide. Flush with new cash immediately in their pockets, we can count on American earners to spend.
Double Unemployment Insurance Payments: Since the 0% tax rate will not immediately assist those suddenly out of work, temporary assistance to the displaced must grow massively. Like the tax suspension, this temporary benefit should revert to prior policy once taxes resume for middle- and lower-income citizens. Think of the hard-working Americans being let go right now from restaurants alone. They deserve our help, and our economy will need them when this crisis abates.
Suspend Student Loan Payments: Not just the interest but the principal as well. Many young Americans struggled to deal with student debt even during the amazing jobs market of the Trump boom. With this shock to our economy, a temporary reprieve -- a near-term debt jubilee, of sorts -- makes sense. Let us encourage young generations to persevere through the crisis. We need their creativity.
The most obvious objection to these plans will be the required borrowing and debt expansion. But given the plunge in global yields, this is the time for America to borrow – the costs of capital have never been lower. In addition, the time to oppose deficit spending was during the good times, not when we face a historic threat to our entire economy. We should have little patience for anyone who suddenly gets religion on deficit spending in the midst of a global economic cataclysm.
Can such sweeping measures pass Congress? Until recently, Democrats on Capitol Hill have seemed to care far more about obstructing this president than assuring American prosperity and security. Many fiscally conservative Republicans may still howl in horror at the “giveaways.” But this is no time to retreat to rigid ideologies or play politics, as New York Gov. Andrew Cuomo, normally a proud partisan, told the world Tuesday morning. He said that after a having a supportive conversation with the president. And Trump, too, must think big.
As ardently as I believe in capitalism and free markets, we have an economy to serve a citizenry, not the other way around. In times of global tumult like this present crisis, only the American government can take the kind of decisive action to literally save our economic way of life.
Now, it is time for our wartime president to embrace this historic task. It is time to channel Daniel Burnham and “make no little plans.”