The case for a big coronavirus stimulus

• Big. The economy faces an unusual degree of uncertainty around several factors: the fatality and transmission rates of the virus, the timing of a vaccine, the direct and indirect economic effects of the epidemic, and the difficulty of making economic policy in a low-interest-rate environment experiencing an unusual shock to both supply and demand.

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Amid uncertainty, policy makers must weigh the risks of overreacting against the risks of underreacting. The likelihood that history judges the economic response to coronavirus as too little and too late is much higher than the converse. If the economic shock is small and stimulus proves to be unnecessary, its negative effects are likely to be small. But if the shock is bigger and policy makers fail to act now, it will be harder to reverse the economic damage. With the federal government able to borrow at a negative real interest rate, doing too much is a minimal risk.

• Comprehensive. It is critical that any stimulus strengthen the social safety net, which will be strained if people lose jobs, get furloughed, or have to stay home without pay. In addition, states and localities will need relief to deal with any strains on their budgets from a combination of emergency spending and falling tax revenues. Without relief, states could be forced to slash spending, which would cut against the effects of federal stimulus and potentially compromise states’ public-health response.

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