Democratic presidential candidate Andrew Yang, who made a universal basic income the basis of his platform, would go further and continue the monthly payments after the coronavirus threat was over.
CNBC financial analyst Jim Cramer also had expansive ideas. He said on March 12:
"How about a $500 billion Treasury issue ... [at] almost no interest cost, to make sure that when people are sick they don't have to go to work, and companies that are in trouble because of that can still make their payroll. How about a credit line backstopped by ... the Federal Reserve. I know the Federal Reserve is going to say they can't do that, Congress is going to say they can't do that, everyone is going to say what they said in 2007, they can't do that, they can't do that until they did it. ... [W]e heard all that in 2007 and they ended up doing everything."
And that looks like what will happen this time around. On March 18, as the stock market continued to plummet, the administration released an outline for a $1 trillion stimulus bill, including $500 billion in direct payments to Americans, along with bailouts and loans for the airline industry, small businesses, and other "critical" sectors of the U.S. economy.
But the details needed to be hammered out, and even that whopping package buoyed the markets only briefly. In the bond market, yields shot up and values went down, on fears that the flood of government bonds needed to finance this giant stimulus would cause bond values to plummet and the government's funding costs to shoot up.
Extraordinary Measures for Extraordinary Times
There is a way around that problem. To avoid driving the federal debt into the stratosphere, the Treasury could borrow directly from the central bank interest-free, with an agreement that the debt would remain on the Fed's books indefinitely. That approach has been tested in Japan, where it has not generated price inflation as austerity hawks have insisted it would. The Bank of Japan has purchased nearly 50 percent of the government's debt, yet consumer price inflation remains below the BOJ's 2 percent target.
Virtually all money today is simply "monetized" debt -- debt turned by banks into something that can be spent in the marketplace and the ultimate backstop for this sleight of hand is the central bank and the government, which means the taxpayers. To equalize our very unequal system, the central bank and the government need to work together. The Fed needs to be "de-privatized" -- turned into a public utility that serves the taxpayers and the economy. As Eric Striker observed in The Unz Review on March 13:
"The US government's lack of direct control over the nation's central bank and the plutocratic nature of our weak state means that common sense solutions are off the table. Why doesn't the state buy up majority shares in large corporations (or outright nationalize them, as happened with the short successful experiment with General Motors in 2009) and use the $1.5 trillion at low interest to develop American industrial independence?"
Interestingly, that too could be on the table in these extraordinary times. Bloomberg reported on March 19 that Larry Kudlow, the White House's top economic adviser, says the administration may ask for an equity stake (an ownership interest) in corporations that want coronavirus aid from taxpayers. Kudlow noted that when this was done with General Motors in 2008, it turned out to be a good deal for the federal government.
While traditionally considered "anti-capitalist," the government taking an ownership interest in bailed out companies may be the only way the proposed bailouts will get approval. There is little sentiment today for the sort of no-strings-attached "socialism for the rich" that the taxpayers shouldered in 2008 without reaping the benefits. Bloomberg quotes Jeffrey Gundlach, chief executive officer at DoubleLine Capital:
"I don't think government bailouts of over-leveraged companies that got over-leveraged by share buybacks at all-time highs, enriching executives and hedge fund investors, will sit well with the American people."
The Bloomberg article concludes with a quote from another chief investment officer, Chris Zaccarelli of Independent Adviser Alliance:
"I like how [the administration is] thinking a little bit outside of the box. Something big and bold like that could potentially be what turns the market around."
Long-term Solutions
Rather than just a stake in the profits, the government could think a bit further outside the box and turn insolvent airlines, oil companies, and banks into public utilities. It could require them to serve the people and the economy rather than just maximizing the short-term profits of their shareholders.
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