WASHINGTON–As various factions on Capitol Hill debate a fourth stimulus package, a group of economists with the Aspen Institute’s Economic Strategy Group have put fourth their own plan for supporting the economic recovery that is tied to the strength of the rebound and not to any specific date.
The group includes Jason Furman of Harvard, who chaired the Council of Economic Advisers under President Barack Obama; Timothy Geithner of Warburg Pincus, who was Treasury secretary during the Obama administration; Glenn Hubbard of Columbia University, who chaired the Council of Economic Advisers under President George W. Bush; and Melissa Kearney of the University of Maryland, the director of the Economic Strategy Group
The Four Prongs
The four prongs to the plan include:
- Income support for the unemployed. The plan would provide a weekly benefit of up to 40% of wages for the jobless as long as a state’s unemployment rate is above 15%, phased out until the rate hits 7%, when it is eliminated
- Additional incentives to return to work. The plan would subsidize lower-wage jobs, which become less attractive when enhanced unemployment benefits are on offer and many of the roles are at higher risk of exposure to the coronavirus, noted the Washington Post, which first reported the plan. Incentives could include a more generous Earned Income Tax Credit or direct hiring bonuses
- Lending to small and midsize businesses. The four economists recommend a “much more aggressive use” of the funds already allocated by Congress to support loans — not grants — to target viable businesses, at better rates, understanding that the government could face more potential losses
- Support the states. The plan calls for the issuance of grants for general use (and especially education), along with federal funding for Medicaid tied to the unemployment rate
The Price Tag
According to the Aspen Institute, the plan would cost just under $1 trillion, but would increase in cost should the recovery continue to be slow.
“Rather than misleading or pretending the recovery will be cheaper, for example by covering only a few months of unemployment insurance or only a fraction of the ultimate cost of the Paycheck Protection Plan,” the group stated, “we believe it is better to be upfront about what the total costs will ultimately be and legislate them today in a contingent fashion that depends on economic circumstances.”