In the early hours of Wednesday, March 25, Congress and the White House struck an agreement on a $2 trillion stimulus package to provide economic relief for individuals and corporations affected by the COVID-19 pandemic. It is the largest stimulus deal in our nation's history. But Nicholas Wyman, CEO of the Institute for Workplace Skills & Innovation, says we can expect to see more legislation in the coming weeks and months.
We continue our conversation with Mr. Wyman on the direction our economy may be headed and why this pandemic, in particular, requires such urgent and expansive action. [Click here for Part 1 of our interview with Mr. Wyman].
Vault: This question has two parts. The consequences of the pandemic are certainly not just felt at the industry level. Small business owners and entrepreneurs, freelancers, retail workers, servers, and people who depend on the gig economy are all at risk. First, how will these stimulus packages help people at the individual level?
Second, there is much debate as to where relief packages should be directed, with many people vocally opposed to “bailouts” for large corporations. Does a balance exist in providing relief at all levels? Where do you think a stimulus package would be most effective in safeguarding the economy?
NW: The stimulus packages have various options to help small businesses and individual workers. The most obvious is a straight-out cash payment to every American. There are some in Congress who believe we’ll need multiple rounds of cash payments if we’re going to stem an economic disaster, but we’ll see some level of cash payment in the first stimulus package.
The House bill signed by the President on the 18th ensures paid sick leave to those directly affected by the virus, as well as expanded food aid and unemployment assistance. And this includes the self-employed – so it covers the freelancers and gig economy workers. That’s a start, and it will go into effect shortly.
As for worries about bailouts, yes, that is exactly what [held] up the big stimulus bill [just passed] in the Senate! Democrats think the chunk of money allocated to business is too unstructured and unsupervised. They worry it will be another bailout with no help for workers. Even the President is uneasy about just handing money to corporations. He wants to make sure there is some oversight, so big business can’t just use the money to buy up their own stock instead of helping their employees.
I personally think they need to shore up oversight if they’re giving big money to corporations. We’ve learned some things from the 2008 bailout, which benefited corporations much more than their employees. No one wants to see that happen again.
Vault: This stimulus package is the largest in history. What is it about this pandemic that requires such expansive—and expensive—action? What, if any, consequences do you foresee to Congress passing such massive spending legislation?
NW: It is clear that the collective amount of the U.S. stimulus packages will be substantially larger than the circa $800m American Recovery and Reinvestment Act the Obama administration passed to combat the GFC [Great Financial Crisis of 2008]. The GFC was effectively a solvency crisis that threatened to become a liquidity crisis until widespread government and Federal Reserve intervention.
The Coronavirus pandemic represents a sudden simultaneous supply and demand shock to the economy. It is a liquidity crisis that will become a solvency crisis unless expansive actions are taken to mitigate the damage and keep individuals and firms afloat until we develop effective preventative treatments via vaccine or we develop herd immunity. Shutting down entire sectors of the economy (and entire countries as we have seen) is unprecedented in our lifetimes, and will have long-term financial and human costs implications. We need to try to ‘flatten the curve’ not only in terms of infections but also for unemployment claims, mortgage and rental foreclosures, debt defaults, bankruptcies, etc.
It is hard to say to what the consequences for Congress will be until the dust settles and the infection rates peak. This is a "We are all Keynesians now" moment, requiring inventive policy responses and direct interventions, which will test the practical limits of political ideologies on both sides, particularly for Senators.
We can say with confidence that the pre-Coronavirus status quo will not hold. For example, in the next six months, tens of millions of Americans will come into contact with welfare and social support agencies for the first time. Will this shift public opinion political ideologies amongst the electorate regarding government payments? Ditto attitudes towards the federal government’s role in healthcare provision
We have heard repeatedly from our leaders in recent weeks that we are all in this together. I think the American people want bipartisan collaborative leadership during such uncertain times.
Vault: Do you think we’re headed towards another recession? What is the likelihood that any of these stimulus packages can help us avoid a recession?
NW: Nothing is inevitable, but on the balance of probability, a simultaneous supply and demand shock like what we are currently witnessing has historically resulted in a recession.
Reading between the lines of Secretary Mnuchin’s and the Fed’s rhetoric, it appears both are conceding the depression.
As such, the aim of the stimulus package is not intended to prevent a recession, but to ensure the crisis is contained and the likely recession does not become a lost decade. Every tactic which was progressively deployed by the Fed to mitigate the GFC has already been redeployed in just two weeks.
Whether the recovery to economic growth is marked by a V, U or L shaped curve will be dictated by factors we currently cannot predict, given our limited knowledge about COVID-19’s behavior and its potential to mutate and how long it takes for us to control the pandemic.
Even after the pandemic passes, we can expect up to at least 5 years, and perhaps a decade of subdued growth as individuals and governments deleverage their budgets and central banks seek to normalize their monetary policy responses.
Vault: What will the lasting impact of the coronavirus pandemic on our economy be?
NW: We can expect this pandemic to reorder the priorities of society and shape the thinking of generations. It is an age-defining event that will have myriad consequences, both predictable and unforeseeable. It’s not an understatement to suggest this will totally reshape the global economy and the model of globalism and mass tourism which has reigned for the past 30 years.
I think the most long-lasting impacts of the coronavirus pandemic will come in the form of changing expectations about the role of government in the economy. Just as we’re seeing a greater expectation in and reliance on the Federal Government to solve a problem individuals cannot, we can expect governments worldwide to reorient their thinking about the role and scope of government services, particularly around preventative health and social infrastructure and to employ more people in these sectors.
The pandemic will also in accelerating workplace trends and employer expectations on a range of fronts. We have already seen an expansion in employee entitlements around sick leave. We can expect those entitlements to become permanent and employer-funded in time. We can also expect expanded flexibility around working from home or working remotely.
Businesses and government will respond through significant additional investment into online capabilities and infrastructure, as companies race to ensure they are able to operate and deliver their services in an entirely virtual way, with education and healthcare delivery first to move. We will also see increased investments in automation technology and partial repatriation of manufacturing jobs, as companies seek to build stronger domestic supply chains to insure against any potential future supply shocks.
Vault: Do you have any advice for our readers on how to brace for a potential recession?
NW: Covid-19 is forecast to infect 60% of the population. So the most important thing right now is to manage the health of you and your family, and stay healthy so you have a strong immune system to fight off any future infection.
Economically, we should obviously all be reconsidering our budgets, debts and spending habits to try to ensure we have the flexibility to meet our obligations during these uncertain times.
If economic and employment opportunities are going to be short supply in the short-term, think long-term. This is a time to invest in yourself, and build your qualifications and skills in order to position yourself for the eventual economic recovery.
Nicholas Wyman is a workforce development and skills expert, author, speaker, and CEO of the Institute for Workplace Skills and Innovation (IWSI Consulting). His award-winning book, Job U, is a practical guide to finding wealth and success by developing the skills companies actually need.
Editor's note: This interview has been edited slightly for length. While most of the information in this interview speaks to the longterm impact of COVID-19, we are aware that the situation is constantly evolving. Please consult your preferred source of news for the latest information on the statuses of the various economic stimulus proposals.
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