- More than $4 are receiving unemployment benefits right now.
- To help unemployed Americans,
Stanford economist Matthew Jackson said the US needs a "New New Deal." - His proposal references President Franklin D. Roosevelt's New Deal after $4.
This article was originally published in April 2020.
Many Americans received a $1,200 stimulus check followed by an additional $600 check. But that's hardly enough to weather the financial storm wrought by the coronavirus pandemic, a Stanford University economist who studies financial networks told Insider.
Instead, the US needs a "New New Deal," or a set of expansive government programs and reforms to help cash-strapped, jobless Americans and struggling businesses, said $4, Stanford economics professor and author of "$4
There are more than $4 receiving unemployment benefits, which works out to more than $4.
"To really get the
The US government has $4 worth of relief through direct payments, emergency loans, and strengthened unemployment insurance under the $4. But that's hardly enough, the economist argued.
"The size of those checks, you know, they're on the order of part of a month's rent or a month's rent - they're not the kinds of things that are going to last people through long-term unemployment," he said.
Americans may need more $4, he said.
The economist is referring to Franklin D. Roosevelt's series of $4 instituted in the late 1920s and '30s after the
The programs included the creation of the Civilian Conservation Corps, which employed young men between 18 and 25 years of age in parks and conservation work, the Civil Works Administration, which gave unemployed people work ranging from highway repairs to teaching, and the creation of Social Security, or financial support for Americans who are elderly or disabled.
Jackson said the coronavirus pandemic is different from the Depression. He said it's worse.
The Depression had numerous sector slowdowns, like finance and farming, but it did not have any sectors so dramatically closed like we do today with the restaurant, tourism, airline, and sporting-events industries, he said.
And while the Depression started with the stock-market crash of 1929 and eventually led to a slowdown in demand from consumers, today the economy is starting out with a substantial loss in production, amounting to a partial shutdown of the economy, which is worse.
"A shutdown of the economy is really unprecedented in modern times. All the time and labor that could have been producing things, that's gone. And that's a real loss to the economy," he said. Gross domestic product for countries across the globe will dip, he added.
The crisis will likely require much more government intervention, Jackson said.
"We'll have to figure out how to first provide a safety net for people so that they get to a place where they can return to work and spend money," he said.
Businesses will need more capital in the form of forgivable loans so they can keep paying their employees while they're out of work, the economist said.
"When people are out of work, they don't spend, and when they don't buy things, then businesses won't be rehiring people," he said.
Jackson said policymakers need to continue to "get creative" with solutions, or consumers could begin defaulting on their loans, mortgages, and other payments. He warned of a global financial crisis similar to the 2007 subprime mortgage crisis if government intervention is minimal.
"That's the other shoe that's going to drop at some point in the future, when businesses, consumers, and even countries start defaulting," he said. "Sovereign countries won't be able to pay their bills."