Sounds crazy, but keep in mind that before John Maynard Keynes and his groundbreaking economic policies came on the scene, depressions were once a regular occurrence in the USA and globally. Since 1945, we have not had a single full-blown depression, though we have come very close many times. And even the Great Recession was a near-depression due to not being Keynesian enough, and implementing unnecessary austerity. Thus, the next logical step would be to do the same for recessions, and use the power of federal Monetary Sovereignty to prevent them before they start. Yes, we really can do that.
Almost every recession or depression is fundamentally caused by a shortage of money. That is a proven historical fact. So the solution is to make sure the money supply (via federal "deficit" spending as well as monetary policy) grows fast enough to keep up with and allow for a growing economy, and make up for shortfalls caused by any contractions in business activity due to internal or external shocks.
So what to do this time around? For starters:
- As a stimulus, give everyone at least $1000 cash immediately, no strings attached. Repeat a few months later if necessary.
- Implement paid sick leave and paid family leave, yesterday. For ALL workers.
- Provide emergency cash to businesses struggling due to the pandemic.
- Put a moratorium on all evictions and foreclosures during the pandemic.
- Do NOT make any cuts to healthcare, food stamps, unemployment benefits, or any other parts of the social spending budget. Instead, expand them, yesterday.
- Invest massively in free testing for coronavirus, and in research and development for treatment and a vaccine for this virus.
- Resolve shortages by using federal funds to actively incentivize production of any essentials that are in short supply.
Longer-term, implement Rodger Malcolm Mitchell's Ten Steps to Prosperity, starting with abolishing FICA, implementing Medicare For All, and implementing Universal Basic Income for all. All of which would be paid for by new federal money creation. Talk about priming the pump!
We have a choice, so let's make the right one. Whether it's recession or disease (or both in this case), the old adage certainly applies: an ounce of prevention is worth at least a pound of cure.
These are excellent proposals which should be implemented at the federal level. Of course, some self-serving members of Congress will probably stand in the way.
ReplyDeleteI actually agree with most of this.
ReplyDeleteThank you, Wayland. By the way, what are your thoughts on the recent lockdowns and shutdowns in the UK as well as many US states and localities? In your opinion, are they crazy, half-crazy, or not crazy at all?
DeleteI don't think lockdowns work. In two months time, the virus will still be here. So much damage to our liberties and to the economy will have been done for nothing.
ReplyDeleteI am not a big fan of lockdowns and shutdowns either, and I would personally put them in the "half-crazy" category at best. While there is some truth to the idea of "flattening the curve" and buying some time to save lives in the short term, there are reasons to be concerned that longer-term shutdowns and lockdowns (some pundits even predict up to 18 months!) can cause a depression that NO amount of federal money can solve until well after such drastic measures are lifted. Because we didn’t quash it early on when we had the chance, there will likely be a long battle against COVID-19, to be sure, but the current “sledgehammer” phase of the battle cannot last indefinitely. Sooner or later we will have to ease or lift restrictions and pivot to case-based interventions rather than population-based ones once any of the following occur: A) the epidemic is largely under control (though the virus still remains), B) we reach the point of irreversible damage to the economy, or C) the epidemic exceeds 1% of the population and “flattening the curve” thus becomes impossible. Whichever comes first. And one of these three will happen within a few weeks from now at most, for better or worse.
DeleteThat’s to say nothing of the cost in terms of individual liberty, which is at *least* as priceless as life itself, as well as the cost in terms of mental health at least in the long run. Economic depression is not the only kind of depression to worry about, after all.
And even for hardcore communitarians who believe that individual liberty is worth absolutely zilch, one can argue that the social consequences of long-term lockdowns and social distancing are ultimately corrosive to community as well.
Thus, lockdowns, shutdowns, etc. are best thought of as short-term tactics, not a long-term strategy. Modest (if any) restrictions and aggressive testing very early on is far better than denial and delaying action and paying dearly for it with tougher restrictions and more casualites later on. Sweden seems to understand that.
In retrospect, you were certainly correct. These lockdowns were really all for naught, and the "cure" did turn out to be worse than the disease. And yet our thick-headed "leaders" on both sides of the Atlantic are apparently eager to repeat the same mistake again. The first time was naive at best, the second time is downright stupid!
DeleteBy the way, I've posted some ideas on your 'History Lesson' page about how we could start to lower the drinking age. Tell me what you think.
ReplyDeletehttps://21debunked.blogspot.com/p/history-lesson.html
I would rather not start out with a compromised position, as one will inevitably have to compromise even further at first. I would prefer to hold the line at 18, but if we must compromise, 19 is at least closer.
DeleteExactly, we should not start with a compromised position.
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