We need a hard pause, followed by a soft start

But this isn’t how policy makers have approached the problem. Their response to the immense economic costs of the public-health policies we are pursuing has instead focused on providing economic stimulus, an approach reflected in some parts of the bill negotiated in the Senate in recent days. But stimulus is the wrong way to think about what’s needed. We need to make the pause sustainable until economic life can resume. That means we should prioritize ways of preventing a loss of place in our economy—especially by helping businesses maintain payrolls, hold on to facilities, and meet economic obligations while they are effectively closed.

The British, for instance, have launched a job-retention policy, with the government covering 80 percent of the salaries of workers furloughed because of the pandemic (up to the median income) provided employers do not fire them. This creates a massive incentive for employers to hold on to their workforce during the crisis. It won’t be cheap, but it is a more effective use of public money than direct payments to households to sustain demand, when such demand can have no real outlet.

We should think along similar lines, and also find ways to help companies pay rent and meet other financial obligations while the public-health emergency persists. The legislation hammered out in recent days does some of that, and will be helpful. But more will be needed, and further steps should more explicitly help people keep their place in the economy. Although we are probably in for a significant recession, our economy is not best understood to be contracting. It is paused.