Along the lines of what Federal Reserve Bank (STL) President James Bullard wants for the US.
While the White House and lawmakers haggle over the terms of an emergency economic-stabilization package, Denmark has gone big—very, very big—to defeat the unprecedented challenge of the coronavirus.
This week, the Danish government told private companies hit by the effects of the pandemic that it would pay 75 percent of their employees’ salaries to avoid mass layoffs. The plan could require the government to spend as much as 13 percent of the national economy in three months. That is roughly the equivalent of a $2.5 trillion stimulus in the United States spread out over just 13 weeks. Like I said: very, very big.
This response might strike some as a catastrophically ruinous overreaction. Perhaps for Denmark, it will be. But we are at a fragile moment in American history. The U.S. faces the sharpest economic downturn in a century, and statistics that seem impossibly pessimistic one moment look positively optimistic hours later. In weeks—even days—Denmark’s aggressive response could be a blueprint for how the world can avoid another Great Depression.
More at the link.
Link: The Atlantic: Denmark’s Idea Could Help the World Avoid a Great Depression - Freeze the Economy
I'm not sure the solution is to avoid layoffs but it is in ensuring the flow of money to those who lose their jobs. I was thinking more of the governments doing two things:
1. Make Employment Insurance (or Unemployment Insurance, not sure what they call it in the US) immediately available to any laid off worker and payments will equal 75%-90% of the worker's salary while the state of emergency exists. By doing this, the worker can continue to feed the family, pay rent or mortgage and all other expenses. I wouldn't fund a 100% just because I want the worker to know they need to have a bit of skin in the game too. When the state of emergency is lifted, the Employment Insurance payments go back to whatever the current system calls for (I think it's like 60% of the lost wage, don't really know).
2. Back stop the banks, not corporations - temporary freeze on corporations, big and small, having to make their loan payments to the banks. The government will loan the banks enough funds to tide them over until the state of emergency is lifted, and normal loan repayment terms will re-start and be extended for whatever length of the state of emergency. Like it or not, we need the banks to survive.
I have no idea what this might cost, and I might change my mind if it turns out to be trillions of dollars, but that seems to me to be the most effective way to ensure we come out the other side of this crisis with an economy and workforce.
Finally, I would be extremely resistant to any sort of bailout funds being handed to corporations on an ad hoc basis. This will be rife with abuse.