Stimulus Cash For Strapped Workers, With Few Places To Spend It The $1 trillion stimulus package proposed by the Trump administration is unusual in that it would give Americans more spending money, even as many spending outlets have been closed by the pandemic.
NPR logo Stimulus Cash For Strapped Workers, With Few Places To Spend It

Stimulus Cash For Strapped Workers, With Few Places To Spend It

The $1 trillion stimulus package proposed by the Trump administration would give Americans more spending money, but beside grocery stores many spending outlets have been closed by the pandemic. David J. Phillip/AP hide caption

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David J. Phillip/AP

The $1 trillion stimulus package proposed by the Trump administration would give Americans more spending money, but beside grocery stores many spending outlets have been closed by the pandemic.

David J. Phillip/AP

Updated at 11:15 a.m. ET Thursday

The Trump administration wants to give Americans an emergency shot of spending money, even as it's closing many of the places they would ordinarily spend it.

As part of its $1 trillion proposal to address the economic fallout from the coronavirus pandemic, the administration has proposed sending up to $500 billion directly to U.S. households.

While details are still being negotiated with Congress, the administration has proposed sending households an initial payment of $1,000 per adult and $500 per child around the first week of April, with another $1,000 per adult and $500 per child six weeks later.

In many cases, the money would be directly deposited in people's bank accounts, Treasury Secretary Steven Mnuchin said in an interview with Fox Business.

Ordinarily, such payments would be designed to stimulate spending and employment. But that's at odds with recommendations from public health officials that Americans hunker down and avoid crowds.

"This is an usual recession because we don't want people to be working," said Harvard economist Gregory Mankiw. "We do want people to be staying home. We don't want all those restaurants to be bustling."

Mankiw, who served in the George W. Bush administration, says the proposed payments should be viewed more as social insurance than a traditional Keynesian stimulus.

"The reason for the cash payments is not only to help the people who need the help but also to encourage them to stay at home, which helps everybody else," Mankiw said.

Bars and restaurants around the country have been closed — except for take-out — and many retail shops have also gone dark, as the government encourages Americans to practice social distancing in an effort to slow the spread of the coronavirus.

That's entirely appropriate, said economist Jason Furman, but it will come with a steep price tag.

"The public health measures are going to hurt the economy quite a lot in the short run, Furman told Weekend Edition Sunday. "Our economic policy, though, should be aiming to cushion the blow as much as possible."

Furman, who was a top adviser in the Obama administration, says direct payments to Americans are an important part of an economic recovery package.

"For some people, that would enable them not to work," Furman said. "So that's not necessarily for them about increasing economic growth. It's about public health. For others, it would let them continue to pay the rent. And for still others, it would put them in a better position to spend after all of this is over."

The administration's plan would also devote $300 billion to loan guarantees for small businesses, so this temporary disruption doesn't cascade into a permanent shutdown.

"There are a lot of businesses that are going to struggle here that we want to survive in the long run," Mankiw said. "So we really need to help the businesses through this time. That doesn't mean a bailout. It doesn't mean handing them cash. But it does perhaps mean providing them with loans so they can keep operating and get back on their feet when this is over."

The proposed loan guarantees would go to small businesses that agree to keep paying workers for eight weeks. Coronavirus closings have already triggered a wave of layoffs. A crush of applications for unemployment insurance this week temporarily crashed computer systems in several states.

"The longer it goes on, the more people lose their jobs," Furman said. "And you don't snap back very quickly when you're in a situation like that."

The administration's rescue package would be even larger than the American Recovery and Reconstruction Act, passed during the Great Recession. Mankiw said that's worthwhile, even though it would add to the mounting federal debt.

"In many cases, I am a deficit scold, but not in this circumstance," he said. "There are certain times that are crises — deep economic downturns, wars --when running a budget deficit and running up the government debt is exactly the right thing to do. And it sounds like in the next few months we're going to be in one of those situations."