Finance Xpress

I wrote this post before the coronavirus pandemic. Now that it is here, many of us are now worried about our health and our wealth like never before. Before continuing, I want to clarify several things: * If you are gravely ill, please contact a doctor. Your health is far more important than your wealth.

The post To Get The Best Life Insurance Rate, Be Careful About Seeing A Doctor appeared first on Financial Samurai.

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At the beginning of 2020, I was excited to start applying for jobs after my six-month paternity leave was over in June. After eight years of unemployment, I had done everything I wanted to do. With now two kids, rising living expenses, and the possibility of a downturn, finding work would be the responsible thing

The post Staying Unemployed: Why I’m Giving Up On Going Back To Work appeared first on Financial Samurai.

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Many Americans are facing home foreclosures as COVID-19 continues to wreak havoc on our economy. How can Americans save their homes? And how can people save on everyday expenses, like internet and cable?

The post How to Avoid Foreclosure and Lower Your Bills in a Pandemic appeared first on The Dough Roller.

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So here we are just a month later,  in a full-blown economic panic, and at the start of the most sudden recession ever.

The pandemic has spread much further and faster than most uninformed people (including me) would have ever guessed, and the whole world is on some form of lockdown. Nothing quite like this has ever happened before in the modern world.

What should we do?

On the financial side,  I’ve seen media stories about “The End of FIRE movement”, and even a close friend said to me, “Well, I’ve got to back to work now because with all my investments down 35%, I’m not financially independent any more.”

And I’ve seen plenty of similar statements out there on the Internet:

Even worse, some people are trying to time the stock market, selling off their investments at a discount in the hopes of “protecting” them, hoping to subsequently outsmart everyone else and re-buy them at an even lower price just before some future rebound.

On the human side, we have seen a death toll of thousands of people per day in the US alone with best-case forecasts of 200,000 by the time things calm down, which implies several million worldwide.

And so far, we have not been performing like a best-case country so these numbers will probably be higher.

This all sounds terrible, doesn’t it?

It makes sense that many people are fearful and pessimistic. So why is it that I remain as optimistic as ever, with the full expectation that you and I will come through this humbled but also wiser and better than ever?

It’s because I already know how this all ends.

The world will keep rallying and doing its best to slow down contagion. Caring people will keep helping each other. People will stay home and heal, hospitals will expand, nurses and doctors will do their best to save as many lives as possible, and the 80% of us in jobs that allow us to keep working, will keep doing our jobs.

Meanwhile, innovators are still innovating all over the world. People are staying up late working in labs, vaccines are being tested, genes are being sequenced and the current flu will end up beaten and then written up as a very significant chapter in the history books.

But apart from all of this, there is still way more going on out there, which just isn’t making it to the headlines. Engineers and scientists are still inventing things that will drastically improve the future. Solar panels are still streaming out by the trainload and being installed worldwide. Better and better batteries which will eventually displace all fossil fuel use are evolving. The most efficient factories in history are being built. Gene therapies are advancing which will eventually make a mockery of all of our current health conditions. Internet connectivity and education is becoming more widely available and cheaper which is allowing the next generation of brilliant kids to to grow up and learn faster and do more than you or I could have even dreamed. And all this will happen regardless of the course of the current pandemic.

If all that is true, then why is the world so Scary right now?

I get it – never before has something from the daily news come home to affect our daily lives so much. Grocery stores are cleaned out, people are wearing masks, and you probably have friends who are currently unemployed, or sick, or both.

But in this situation, it really helps to understand the big picture of what is actually going on. The world is not ending. The air outside your windows is not a swirling cloud of certain death.

All that has changed is that we are in a self-imposed economic slowdown that has been created purely to save the lives of our most vulnerable people.

Which is one of the most compassionate things our society has ever done. To me, this is a remarkable and wonderful moment and I would not have guessed that such a capitalist country would ever have the balls to do it.

To put it into a visual, we have decided to prevent the following worst-case scenario:

And turn it into this:

In the worst case, our public officials would all downplay the risk of COVID-19, and we’d keep working and traveling and spreading it freely. We’d maximize our economic activity and let the disease run its course.

From the disease models I have seen so far, about 70% of us would eventually contract it. Half of those would have no symptoms or very mild ones, a smaller (but still huge) number would get sick or very sick, 10% might end up in a very overloaded hospital system, and in total about 1-2% of our population would die from complications – partly depending on how quickly we could put up temporary treatment centers to cycle through 30 million people in only a few years.

It would feel cruel and chaotic, but in reality we would still not be even approaching the conditions that people in the developing world deal with every day. Our world has always been cruel and chaotic in so many ways which effect a much larger number of people – we just happen to be used to them. And one thing that humans are exceptionally good at, is getting used to things.

In the more compassionate case which we are currently following, we drastically reduce the amount of contact we have with each other for a few months, which cuts the number of deaths in the US down from 3-6 million, down to perhaps 200,000. In exchange, our economy shrinks by several trillion dollars (it was about 21 trillion in 2019) for a year or more.

Assuming we are preventing 3 million early deaths, this means our society is foregoing about one million dollars of economic activity for each person’s life that we extend and frankly, it makes me happy to know we are capable of that.

So that’s the big picture: we are cautiously and temporarily buckling down and making some sacrifices, in order to help other people.

To me, that is not a cause for panic or fear – it’s an opportunity to try even harder and be thankful for such a once-in-a-lifetime opportunity.

Meanwhile, some good stuff is happening as a byproduct:

• We are driving around and polluting far less. The air is drastically cleaner everywhere.
• People are out walking with their kids far more. The streets of my town are nearly free from cars, and are being enjoyed by (appropriately spaced) bikes and people for the first time.
• Our expectations are being reset. Someday soon, it will feel like an absolute joy and privilege to walk into a store and see things fully stocked and prosperous again. And imagine the feeling of taking a vacation or attending a big event or a restaurant or a party!
• People in rich countries may realize that we can afford to be helpful and compassionate after all – while actually increasing our long term wealth and happiness rather than compromising it.
• And the world is getting a valuable “practice run” at handling a pandemic, with a relatively mild flu rather than something more serious.

So How Does This Affect my Retirement?

Once you really get the big picture above, you can see that we are going to come through this better in every way.

Just as with any recession, weaker companies will go bankrupt, stronger ones will streamline their operations and get smarter, and the chaos and broken pieces will create become the raw materials from which an enormous batch of brand-new companies will form.

Better ways to track and treat disease, more scalable and less bureaucratic hospitals, more options for remote medicine and more support for remote work and virtual offices and virtual learning in general. More home delivery services and fewer big box stores and wasted parking lots, more support for biking and walking, and a million other things that a billion other people will think of.

The end result will be a better, more resilient and richer world than ever. Yes, that will also eventually mean more money in your retirement account, but more importantly it means better and happier living conditions for every living thing on Earth.

While this all sounds like optimistic magic, it’s actually just a byproduct of human nature. We are a lazy and change-averse creature and we become complacent when when our fearful and primitive brains think things are “good enough” for survival and reproduction.

So, oddly enough, we often need a good slap upside the head to get off of our collective asses and actually make some improvements. Observe the wisdom of our elders:

• When the going gets tough, the tough get going.
• Necessity is the Mother of Invention.
• What doesn’t kill you, makes you stronger.

As old and repeated as these slogans might be, they stick around because they keep proving to be remarkably true. They are the real-world manifestation of a badassity that is built right into our Human DNA, which is why they are some of my favorite phrases in life.

Are things a bit hard right now?

GOOD.

See you in the inevitable and incredible boom-time that will result.

—-

Other Interesting Things That Might Help You Feel Better:

The Simple Path to Wealth, by my longtime author/blogger friend JL Collins, explains long-term investing in the most simple and calm way imaginable.

Towards Rational Exuberance is a more technical and detailed (but still very fun to read) history of the stock market and how the Federal Reserve bank serves to stabilize our system. Although I read this book over fifteen years ago, it has underpinned my understanding and confidence in long-term investing ever since. I would love it if author Mark Smith would add a few chapters to cover the two most recent market crashes as well!

A Guided Meditation for when the Stock Market is Dropping, is Jim’s witty YouTube reminder of the same thing, which he somehow created long before any of this panic started – how could he possibly have known in advance??

Good News, there’s Another Recession Coming is my own magical forecast of the present moment, made over two years ago.

Why We are Not Really All Doomed, my 2014 take on why the world was (and still is) well positioned for many decades of future prosperity.

How To Retire Forever on a Fixed Chunk of Money gets into the reason why stock market drops like the present one don’t really hurt an early retiree (it’s because the vast majority of your shares will be sold several decades from now, when the present panic is barely a blip on the graph.

And finally, just for fun here’s an example of something that is not written to make you feel better. In recent weeks, I spent several hours writing out some interview answers for an article in the New York Times.

I was truly excited to share the details of why the Principles of Mustachianism are more useful than ever in times like these, and it’s quite the opposite of “The End of FIRE” that the silly and financially naive media have been peddling in recent stories.

I was disappointed in the end result. Most of my answers were cut out, and instead the article is focused on “hardships” that other early retirees are currently working through. And the clickbaity title sets the expectations wrong to begin with:

They All Retired Before They Hit 40. And Then This Happened.

(that link will take you to my Twitter post about it, where an interesting discussion has formed in the comments – what do you think?)

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Hospital bills are extremely expensive and medical billing mistakes only make it worse. Fortunately, a few apps can negotiate those prices down.

The post Best Apps to Save Money on Hospital Bills appeared first on The Dough Roller.

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Congress just passed the biggest aid package in modern history. We ask six former White House economic advisors and one U.S. Senator: Will it actually work? What are its best and worst features? Where does $2 trillion come from, and what are the long-term effects of all that government spending?

Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

*      *      *

Glenn HUBBARD: Well, I think the goal from the beginning was the right one. How do we shore up the economy during a period of shutdown?

As you likely know, last week Congress passed and the president signed the CARES Act — that’s Coronavirus Aid, Relief, and Economic Security — at a cost of $2-plus trillion.

HUBBARD: This is not familiar territory for many politicians who normally think about “stimulus packages.” Rather, it’s an economic — I don’t know how you would say it — freeze-frame package. What does it take to keep the economy simulating as normal while we work out the health problem?

The health problem, as you also know, is that the U.S. has become a global hot zone for Covid-19.

Austan GOOLSBEE: Look, the first rule of virus economics is that only by slowing the spread of the virus can you do anything to fix the economics.

How well can the economics be fixed? Today on Freakonomics Radio: we try to answer all your questions about the CARES act, with the help of seven guests. They include one U.S. Senator, a Democrat from New Jersey. A former senior advisor to President Trump. And five economists, each of whom has worked in the White House — two under Republicans, and three under Democrats. All the economists had crisis experience during their White House tenures. For some, it was the global financial meltdown:

Christina ROMER: The consequences of doing the wrong thing just feel absolutely enormous.

For others, it was the 9/11 terrorist attacks:

HUBBARD: Obviously it’s a human tragedy. And from an economic perspective, while we had a shutdown, this is much bigger than that.

The economic damage from the coronavirus is so much bigger — already — that the relief package it provoked is the largest in modern history. The CARES act includes half-a-trillion dollars in aid to industries and big firms; more than $350 billion to small businesses; and billions more set aside for states and cities, the healthcare industry, and more. It called for the suspension of student-loan repayments and the relaxing of 401(k) restrictions. But the feature that got the most attention — the most unusual feature — was another half-a-trillion dollars in direct aid to individuals, which comes in two distinct forms.

The first is the so-called “unemployment on steroids” — billions of dollars in added unemployment payments to essentially act as total wage replacement for laid-off workers. The second form: direct cash payments of $1,200 for most people who make $75,000 a year or less, or $2,400 for a qualifying couple and another $500 per child. All told, the CARES package is an unprecedented treatment for an unprecedented crisis. So we ask our guests: will it actually work? Where does the money come from? What are the best and worst features of this massive bill? And, in a crisis package like this, Congress surely didn’t slip in any pork, did they?

GOOLSBEE: One hundred seventy billion dollars of a tax loophole to help real-estate tycoons.

Gary COHN: Seventy-five million dollars in there for Big Bird and public broadcasting. I’m not sure what they have to do with the coronavirus.

*      *      *

Before we get started today, I’d just like to say, on behalf of everyone at Freakonomics Radio, we hope that all of you and your families are doing all right in the middle of this COVID-19 pandemic. We’ve been hearing from a lot of you lately — doctors and nurses, religious leaders, teenagers worried about their parents and grandparents. It’s good to know there are so many people out there using their intellect and moxie to try to help out.

I’d also like to thank and commend the rest of the Freakonomics Radio crew — the people whose names you hear at the end of our show every week. They’ve all been working incredibly hard, in strange and difficult circumstances. So this week, let’s thank them upfront. They are Alison Craiglow, Greg Rippin, Zack Lapinski, Daphne Chen, Matt Hickey, Harry Huggins, Corinne Wallace, and Isabel O’Brien. And thanks to all our guests this week.

Stephen J. DUBNER: Now, in just a sentence or two — how effective do you think this package will be in stabilizing or rescuing the economy?

COHN: I think this package will be effective. They have done exactly what they needed to do and what they should have done.

That’s Gary Cohn, former head of Trump’s National Economic Council and, before that, president of Goldman Sachs. And, just so you know, Cohn is actually a Democrat.

COHN: And what that is, return every hard-working individual’s financial position as close to where it was before this pandemic hit the U.S. economy. And we will take care of your unforeseen medical costs if they have to do with the virus. And therefore, you will be fine to get to the other side of this and we will keep you employed.

Katherine BAICKER: Yeah, this is a very different crisis from the last one in that the economic fundamentals are very different.

That’s Katherine Baicker, a healthcare economist at the University of Chicago, who worked on the Council of Economic Advisers, or C.E.A., under George W. Bush.

BAICKER: And we need people to stay at home for their health, for the health of their communities. To maximize economic well-being over the long term, we need to be focused on health right now. That’s a very different state of affairs from a crisis that is fundamentally financial in origin.

Larry SUMMERS: I think it’s a good bill. All things considered, to have passed a $2 trillion bill as quickly as we have is an achievement for the government.

And that’s Larry Summers, a Harvard economist who ran Obama’s National Economic Council and was Secretary of the Treasury under Clinton.

SUMMERS: I hope the money will go out as quickly as possible. We have not shown ourselves in recent years to be a highly competent society. We should have tests on a scale we do not have tests. We should have ventilators on a scale we do not have ventilators. I think people who hear that Congress has passed a law and think that money is coming to them in a day or a week are most likely to be disappointed.

ROMER: At some level, the passing the legislation is almost the easy part. It’s the implementation, once you have the bill, is really hard.

Christina Romer, an economist at the University of California, Berkeley, ran the C.E.A. during Obama’s first two years.

ROMER: You need to process the unemployment insurance claims. You need to do the one-time support payments to people, or the stimulus payments. Can we get everybody that is eligible for that unemployment insurance, do you make sure that they know they’re eligible, that we have the digital interface so that people can all apply, and the computer doesn’t crash?

DUBNER: What, in your view, is the single best feature of the CARES Act and what is the single worst feature?

HUBBARD: Honestly, I think the single best feature is the speed with which our political leaders came to bear.

That’s Glenn Hubbard. He worked in Treasury in the early 1990’s, in tax policy, and chaired the C.E.A. under George W. Bush in the early 2000s.

HUBBARD: Compare this to ‘08, when there was dithering by both the Fed and the Congress. Not happening this time, so I think that’s a plus. In terms of weakness, it’s hard to say. It’s the fog of war. I think ex-post, we will have wanted to see more in some areas, but this is not going to be the last recovery bill.

GOOLSBEE: So, I think, in a way, the worst thing about this bill is that it’s not really about how do you slow the spread of the virus.

And that’s Austan Goolsbee. He’s an economist at the University of Chicago and was another chair of the C.E.A. under Obama.

GOOLSBEE: It’s not a call to arms, to massively ramp up the production of ventilators or to get health professionals off the sidelines and stuff like that. I’m a little nervous that people are getting ready to pat themselves on the back — “Ah, we just passed a $2 trillion thing to save the economy” — and you’re not saving the economy until you slow or contain the virus.

Cory BOOKER: Look, I don’t know how I would rank them, but when you ask me the question, the very first thing that came to my mind was unemployment insurance.

And that’s Cory Booker, a U.S. Senator from New Jersey, and a Democrat.

BOOKER: And maybe that is best and worst. It was the best because it has incredible paycheck replacement, virtually, for many families. And I think that is a very good thing, to make families whole, when many of them are taking on new expenses as well. Some of the worst things are the people that are excluded from that. And I fought really hard to get something called an ITIN, people that have individual tax identification numbers, to be included in that, which would have taken many people that are workers that are undocumented but still pay taxes — that’s why they have an ITIN number, and have, often, children that are American citizens.

DUBNER: So as of now, they’re still excluded from those direct payments, correct?

BOOKER: They’re excluded from direct payments, they’re excluded from unemployment insurance as well.

DUBNER: So what happens to them?

BOOKER: I mean, I’ve been getting calls from all around my state. They’re losing their jobs. Their children go to our schools. And those families are in crisis and have nowhere to go. And the mayors were just asking me for help. Their food pantries and food banks are being oversubscribed.

So, as Booker points out, the wage replacement part of the CARES act leaves out the most vulnerable Americans. Which is why he thinks it’s the best and worst feature. Gary Cohn is less equivocal.

COHN: So the wage-replacement piece and the job-continuation parts are by far the best piece of this. What we need to do in a time like this is, we need to keep as many people as possible, we need to keep their paycheck flowing. A, it’s important for them to be able to feed their family and buy the things they need. But more importantly, it will provide a foundation for us to be able to recover from, when companies know that they have existing employees to call upon to come back and restart whatever industry or business they’re in.

DUBNER: Okay, worst feature?

COHN: So, I think the worst feature was the just outright individual checks.

DUBNER: Because why?

COHN: Look, the bill was written well enough that any hard-working individual in this country is going to get an income replacement from their employer. The employers are going to replace their income. The gig economy workers are going to get it through unemployment. So they did a very, very good job of looking at the workforce of 2020 and saying, how do we make sure that every aspect of the workforce gets paid?

And they did that. I give that a good mark for that. Then they sort of put whipped cream and cherries on top, and they decided to send these checks. These $1,200 checks or these $2,400 checks, plus $500 for families. Which, in a time like this, where really all you can buy — and all you should be buying, because we’re trying to get people out of the economy to flatten the curve — all you should be buying is groceries and medical equipment. It’s not stimulative to give you money if there’s no place to go spend it.

Gary Cohn, remember, worked in the Trump White House. But Christina Romer worked in the Obama White House, and she largely agrees about the individual checks.

ROMER: Yeah, I will confess, I think the payments to individuals are perhaps the — I don’t want to call it the least-useful part of the program, but it’s perhaps the least well-targeted.

Just to be clear, Romer is talking about those $1,200 checks to individuals. As for the “unemployment on steroids”: she, like Gary Cohn, approves.

ROMER: So precisely why I thought unemployment insurance on steroids makes sense is because you want to get the money into the hands of people who really are out of work, lost their job, can’t go to work, are self-quarantining, all those things are just so valuable. And with the payments to individuals that aren’t tied to whether you’ve lost your job or anything like that — I think it’s not terribly useful. And it’s not calibrated to the cost of living in your area, it’s not calibrated to whether you’re one of the people that are still able to work versus one of the people that have lost their job.

GOOLSBEE: I disagree with that—

That’s Romer’s fellow Obama-era C.E.A. chair, Austan Goolsbee.

GOOLSBEE: Because there are a lot of people who, in our current state, do not have jobs, who did not just get unemployed, who might very well need relief. Just take the however many — is it, 60 million retirees?

Actually, it’s more like 45 million. But, still:

GOOLSBEE: They’re not ever going to get any unemployment insurance. They’re the most at health risk in this thing. And I think sending out money, extra money in their Social Security check, is not a bad idea.

And here’s Hubbard, who was in the White House during 9/11.

HUBBARD: I think that writing checks to individuals is perhaps less effective than people think. First of all, if you’re keeping people attached to work and wages, they don’t need it. Second, it’s not very quick. I mean, I remember from the 2001 experience, it took us a little while to get checks out, even though President Bush got his legislation passed very quickly. I think it’s going to take longer than Treasury thinks.

COHN: Well, where are they going to spend it today?

Gary Cohn again.

COHN: They could spend it on things that maybe they don’t need to or shouldn’t spend it on. If I thought that money would be saved for a half a year from now, I would completely have a different opinion. What I’m afraid of is, people find a way to spend that money in the next three or four weeks. And then when we start opening the local shops, they will have no money to go back in the local shops and buy things. There will be a time to stimulate the economy and get you to spend money. But this is not the time.

DUBNER: Does it feel like they slipped in a universal basic income? You know, in the side door?

COHN: It feels like they slipped it in. Yes.

A universal basic income is an idea that’s been championed over the years by a handful of economists and politicians — both Democrats and Republicans, by the way. Plainly, these $1,200 relief checks aren’t really that; this is a one-time crisis payment — unless, of course, it turns out to not be a one-time crisis payment. So how did these extra checks, nearly $300 billion worth, how did that come to happen?

BOOKER: Well, I want to be as descriptive as I can.

Senator Booker again.

BOOKER: Chuck Schumer runs a very democratic side of the aisle, where he creates working groups and has a very open-door policy.

Chuck Schumer is the Senate’s minority leader.

BOOKER: I called Chuck from early in the morning to late at night on various issues that we were fighting for.

Although the CARES act wound up passing the Senate unanimously, there was plenty of pushing and shoving along the way. The Democrats insisted on much stronger controls on the aid to corporations and industries, for instance. The direct payments to individuals had both Republican and Democratic support.

BOOKER: There was a group of about six of us that came out early on cash payments.

DUBNER: Now, we just talked to Gary Cohn, former head of N.E.C. He thought that one feature of CARES that was overkill was these cash payments. Because he felt that the money was going to flow already to individuals from employers and unemployment benefits and so on. Tell me why you obviously disagree.

BOOKER: Well, because I’m the only United States senator who lives in a community at or below the poverty line. And I see what families were struggling with already and how difficult it was for folks to make ends meet before a crisis. But there are lots of things that come into their lives in a crisis like this that folks don’t realize. Just common-sense things.

And sometimes I hear people telling folks to shelter in place or keep distance with your parents. But, you know, I was talking to a family two days ago that, like many families in America, have already doubled or tripled up in housing because we have such a housing crisis in America. Having this money coming to families during a crisis really helps on a lot of levels, from practical to anxiety.

DUBNER: A lot of workers, almost all workers, even freelance workers, are going to be receiving, if I read it correctly, essentially full wages, even though they’re not working. And I’m curious whether this might create potentially a perverse disincentive for some people to show up for work. Because, you know, if I’m working at a grocery store or delivery or a security officer and I’m counted as, I guess, essential or necessary, but I’m concerned about myself and I know that I can get paid just as much, if not more, by not showing up, what’s going to happen there?

BOOKER: This was a point that was made on the Senate floor in what was one of my top favorite sort of instantaneous debates, where people were on the floor and just arguing this. And it was wonderful to watch. And I put them into two camps. One camp that must think that Americans are scofflaws, and have this very suspicious concern about them. And then the other camp that just had a lot more faith in folks and also understood that this is a very short-term bit of money. I fully believe—

DUBNER: You’re on the faith side.

BOOKER: I’m on the faith side. I have seen 9/11. I have seen Superstorm Sandy. And when I’m going around these days, what I’m seeing is Americans rising to this challenge and wanting to find ways of being of service.

GOOLSBEE: So there was a group of Republicans who objected in the bill and tried to hold it up over the fact that unemployment insurance, in their view, was too generous.

Austan Goolsbee again:

GOOLSBEE: To make unemployment insurance so lucrative, you would discourage people from either going back to work or talk to their employer and say, “Please lay me off,” you know, “It’s better.”

SUMMERS: I think that actually is a legitimate concern.

And that’s Larry Summers.

SUMMERS: On the other hand, I think in the context of an emergency moment of this kind, for something that, God willing, we’re only going to need at massive scale for a few months, I think moving on with it is probably the preeminent value.

And Glenn Hubbard again:

HUBBARD: I think most people are forward-looking and a thousand dollars doesn’t sound like enough to tempt me to quit my job. I think it’s more that you might be giving some people money that they really didn’t need. But frankly, again, in the heat of battle, overkill is better than the other way around.

DUBNER: So one big complaint from many quarters is that the CARES legislation is too generous to corporations, at the ultimate expense of taxpayers. I am curious to hear your view about how the money has been apportioned to, let’s call them, corporations, individuals, and then other institutions like hospitals and so on. In terms of the general splitting of the pie, how do you feel about that?

BOOKER: Well, this is not, for me, some kind of binary thing. I don’t think corporations are bad.

Senator Booker again.

BOOKER: So there’s a lot of bad things going on in our policy practices towards corporations. But this idea that somehow they’re evil and nefarious — it’s just unacceptable to me. We need to be doing things to create more accountability and transparency around corporations, in fairness, but also to remember that there are human beings working for these businesses. And the airlines is a great example. I live in a neighborhood that has people working for the airlines and have critical jobs. I think those jobs should pay more. I think those jobs should have better benefits. But I don’t think they should disappear if the industry crashes.

SUMMERS: If the government finds it necessary, and it may well be necessary, to bail Boeing out at this moment, the least Boeing can expect is that a significant part of the upside will go to taxpayers.

Larry Summers was an an architect of the bailout of U.S. automakers during the global financial crisis. 

SUMMERS: There is no reason why the airlines are entitled to simply get a gift from taxpayers for the benefit of their shareholders. We should do what’s necessary to keep planes flying and to have a vibrant commercial aviation system in this country when the time comes, and the virus has passed. But the major contributors to that effort should be the shareholders and those who decided to lend money to our airlines.

HUBBARD: I think that the reason for the airline bailout has less to do with passenger travel and more with cargo travel.

Glenn Hubbard learned a lot about the airline industry after the 9/11 attacks.

HUBBARD: They’re very important in moving mail, certain high-value shipments. And in the Bush administration, we intervened very sharply for airlines, largely for that reason.

Hubbard, like several of the economists we’re speaking with today, was consulting last week with members of Congress over the CARES package, lending their expertise and experience. Hubbard even quickly wrote a white paper, arguing for particularly strong support for small- and mid-sized businesses so they can continue to pay all their expenses, especially their employees. The CARES packages does set aside more than $350 billion for that purpose, much of it distributed by the Small Business Administration — but even last week, the S.B.A.’s website was already overwhelmed with loan applications. I asked Hubbard what he thought about the small-business relief in the CARES act.

HUBBARD: Well, I just think it costs much more than they think. The estimated costs that I worked on with a private firm that has data on every business in America is about three times the cost of the congressional package. So with respect, I just think the estimate is off.

DUBNER: Could you please describe the calculation you did, the number you arrived at, and how that differs from what’s in the CARES Act?

HUBBARD: The estimate that I worked on suggested if you needed to replace most of revenue for firms in the service sector with 500 or fewer employees for three months, that’s a number, call it close to a trillion dollars. Obviously, much more than the number in the CARES Act. The legislative language in the CARES Act mirrors very closely what I suggested. But I can say it doesn’t cost $350 billion.

DUBNER: So you’re saying that the mechanism is a good one, but the amount may be too low?

HUBBARD: Well, I think it’s just going to cost more than they think. The mechanism is a good one. What I think was important was that this would go through banks. Small-business people have a relationship with a bank. It would be a guaranteed loan and it would be forgiven if people didn’t lay off their workers. That sounds a little convoluted, but it was easier than setting up a government agency in real time.

DUBNER: To me it sounds convoluted, but I’m not a small-business person. I’m not a banker. I’m not a policymaker. So persuade me that it will work. Because, you know, form-filling and application-filling can be really onerous in the best of times, and these are the opposite of the best of times. Plus the demand from these small businesses is obviously going to be huge. Do you think this mechanism will prove effective in the real world to help these businesses stay frozen in place until the thaw?

HUBBARD: I do. And it’s the bulk of my phone calls all weekend on this, to try to make it work. I think banks are very good at this. The S.B.A. probably less so, but I think the key for the administration is to communicate with small-business people and banks to make sure that this actually works.

COHN: This would be a new use of banks.

Gary Cohn, remember, was president of Goldman Sachs before joining the Trump Administration.

COHN: Literally, small businesses would need to come in banks and fill out paperwork to get the money. A, banks aren’t really set up for that, and a lot of banks are on highly scaled-back or nonexistent crews. Many of the bank offices are closed.

And yet: Cohn is hopeful.

COHN: You know, none of us have done this before. So it is an experiment.

And he agrees this small-business measure is absolutely vital.

COHN: We need to literally freeze these small businesses — say, “Hey, you know, on February 15th, you were X, today you can’t afford anything. So let’s keep your people on the payroll, let’s pay your rent. And when you can go back to living somewhat of a normal business environment and your clients can come through the front door and your suppliers can call and engineers can help you build, and we can go back into a normal business environment where all of the pieces work,” and I’m very optimistic that over some relatively short period time we can return back to a normalized working environment.

ROMER: Many small businesses are really close to the margin. 

That, again, is Christina Romer, Obama’s first C.E.A. chair.

ROMER: If you’re running a restaurant or a brick-and-mortar store or whatever, I think it’s not going to take very much before you just have to close your doors. And most small businesses are not going to take on a big loan that they’re never going to be able to repay. They will just shut their doors.

So Hubbard and Cohn are optimistic the small-business rescue can work. Romer, a bit less so. I asked Austan Goolsbee to think it through a bit further.

DUBNER: So I’m curious to know, you have a business, you have customers, they give you money, you pay rent. Landlord’s got a deal on the building, pays to the bank. So we kind of know the chain. But right now, it seems as though the hope is that the federal government is going to make money available to small businesses, which they have to procure, which might be complicated. And the idea is that if they procure this money and they use it for sanctioned purposes, then they won’t have to repay that money. With the idea being that they’ll be able to essentially stay, you know, frozen in place until there’s a thaw. To me, that sounds lovely if it could work, but it doesn’t sound very likely to work. And I’m curious if you’re maybe a little bit more optimistic than me.

GOOLSBEE: I don’t know. You know, as you say that, you make me more nervous about it, because we did have, in the Great Recession, a whole bunch of things like that. There’s a tradeoff between simplicity and ease of getting the money out versus targeting and efficiency. Are the right people getting the money, and are they doing the right thing with the money? We’ll just have to see how it plays out, and who makes the loans and how willing the small businesses are to get the money to stave off shutdown. If they’re not able to do it, then looking back, they will say that was a terrible mistake.

If they are able to get the money and do it, they’ll say, “What a brilliant idea.” Now, we might end up being fortunate in the sense that if we get lucky and the virus subsides on its own, or our social-distancing measures work and we limit the size of this thing, it is quite possible that the economy comes booming back on its own accord. And if it does, we will probably not have as much recrimination over the $2 trillion we spent because people will say, “Hey, it’s a good thing we moved quickly, and it worked out fine because after three months we all were able to go back to work.”

*      *      *

If you thought the U.S. Congress could pass the biggest economic-relief legislation in modern history and that it wouldn’t have some pork-barrel spending stuffed into its more than 800 pages — well, you don’t know much about Washington.

COHN: If you’ve been in Washington long enough, you learn two things.

That again is Gary Cohn, a Goldman Sachs alumnus and a Democrat who was head of the National Economic Council at the start of the Trump Administration.

COHN: Number one, never let a good crisis go to waste, and Washington was not going to let this crisis go to waste. And number two, every spending bill is looked at as a Christmas tree. And this is a really big Christmas tree. There’s some amazing ornaments on it. There’s $25 million for the Kennedy Center, which is an organization that is supported by great philanthropy. There’s seventy-five million dollars in there for Big Bird and public broadcasting. I’m not sure what they have to do with the coronavirus. So there are a lot of amazing ornaments and tinsel on this tree.

DUBNER: What you’re describing sounds like it’s mostly coming from the Dem side. Tell me if I’m wrong. But also, I’m curious: I’m assuming there’s plenty of Republican tinsel as well.

COHN: Oh, there’s definitely Republican tinsel.

HUBBARD: I suspect everyone is lobbying, for good or for ill.

And that’s Glenn Hubbard, who was chairman of the Council of Economic Advisers under President George Bush the younger.

HUBBARD: The question is, what are the rules by which the principals, like the secretary of the Treasury and others, are going to use to make sure this aid gets into the right hands?

DUBNER: What do you think is the porkiest thing in this package?

HUBBARD: Honestly, it’s hard to know, because I haven’t read all 800 pages or whatever it is. But my guess is it’s going to be some of the big-business relief provisions.

GOOLSBEE: When you get into the $500 billion of bailouts to big companies—

And here’s Austan Goolsbee, who was chair of the C.E.A. under Obama.

GOOLSBEE: And $200-and-some billion of further corporate tax cuts and $170 billion of a tax loophole to help real-estate tycoons, I think that stuff threatens the political legitimacy of rescues and relief and the things that we’re going to need to do, as this crisis unfolds, and then on the back end, when we start trying to come back.

Interestingly, however, every person we spoke with for this episode — and that includes Goolsbee and the other Democrats and all the Republicans — they all thought it was generally a very good idea to throw a couple trillion dollars at the economy right now. And pork is just the tax you expect to pay in Washington, the cost of getting legislation passed. Still, $2-plus trillion, that’s a lot of money! It’s about one-tenth of our entire G.D.P. It’s almost double the federal government’s total discretionary spending each year. Which makes you wonder — or at least it made me wonder — if, in the long run, the treatment here may cause its own very large problems down the road.

COHN: Well, I’m not sure I see it on the money. Right now, I pretty strongly believe that we cannot have every business in the United States shut down, terminate all their employees, and have literally, you know, 30, 40, 50 million people go on unemployments at once. The immediate effect of that would be catastrophic. But even more important, when the economy went to turn around, you would then have to re-create new companies and rehire people. And it would slow that process down. So that to me would be a horrible, horrible outcome.

Still, you have to ask: where does $2 trillion come from, and what are the long-term effects of that borrowing?

HUBBARD: It’s an excellent question and it’s not asked enough.

ROMER: The answer is, we don’t have it.

Christina Romer again, the former Obama adviser.

ROMER: So where it’s going to come from? We’re going to borrow.

COHN: All money from the federal government comes from one place. It comes from debt issuance. You know, we in the United States just don’t print money. We print money based on having borrowed it from lenders, people that want to lend.

ROMER: Fortunately, people want to lend the United States government. They’re willing to do it at very low interest rates. So unlike some countries, we have the ability to borrow, which is a godsend in the current situation.

COHN: Right now, we happen to be operating in a period of time where we’ve suspended the debt-ceiling caps, so we don’t have to raise the debt-ceiling caps to fund this bill. But the Treasury is out raising debt right now in a variety of auctions. And we will be financing this for many, many decades to pay for this.

HUBBARD: Hopefully, this bill and whatever follows — you can think of it as a large, one-time expenditure, much like fighting a war, which is probably the nearest analogy. That will have to be paid for in the future by some combination of higher taxes and lower other spending, unless we want to have a permanently higher debt burden. Because this is a one-time effect, the U.S. probably can carry it for a very long time.

ROMER: But it’s a question that does, I think, put into relief the idea that, at some point, we’re going to need to raise revenues. Think about fighting World War II. That was another case where we could say, we’ve just got to borrow a lot to do something that’s really important. Well, that’s where we are now.

GOOLSBEE: Look, in World War II, that part is the right analogy. Nobody in World War II was like, “How do we make World War II revenue-neutral?” The thing to do is make sure civilization survives. And then come back and sort out, okay, now we have some debt. We got to pay down the debt, and that sort of thing.

ROMER: What we spent a lot of the 1950s and early 1960s doing is raising taxes and paying down a fair amount of that new debt that we’d had to take on to fight World War II. And I do think we’re going to have somewhat of a fiscal reckoning when we come through this.

COHN: So we could come out this year with, you know, $25-plus trillion in debt, way above anyone’s wildest projection of where we would have been.

ROMER: There is going to have to be a period where we say we’re going to have to live more within our means, we’re going to have to raise revenues. And, you know, I wish we’d been doing that before. To be clear, we were running a big budget deficit before any of this happened. So back when we were at full employment, we were still running a trillion-dollar deficit. And now we’ve just decided to spend another $2 trillion that we don’t have the revenues to cover. But we are where we are. It’s good that we’ve done this, but we do need to get our fiscal house in order at some point.

COHN: My view is, everything is and should be on the table. I think we really should take this opportunity to do a once-in-a-lifetime reevaluation of both spending and revenue. Everything should be on the table.

But before that, we probably shouldn’t be too surprised if Congress were to come back, even very soon, for another trillion or two. Perhaps for infrastructure or other rebuilding projects. And there are two large areas that are included in the CARES act that some people feel didn’t get enough money. One, as Austan Goolsbee noted earlier, is fighting the pandemic itself. That said, there are countless federal and other agencies focused on that, so you could say it’s wise to keep the economic relief focused on economics. Also the CARES act, along with some earlier, smaller pandemic legislation, did include some healthcare changes. Here’s Katherine Baicker, the healthcare economist who spent two years in the George W. Bush White House.

BAICKER: There are changes in health-insurance regulations and coverage that I think are really important in terms of making sure that there are no financial barriers to getting tested, to getting treatment, that telehealth visits are exempted from patient cost-sharing, that plans are allowed to amend their coverage to add more benefits mid-year, that Medicaid funds can be used to provide testing and treatment for families who are uninsured. All of those provisions are really helpful as well.

The other area that some people feel didn’t get enough direct aid in the CARES act — and by “some people,” I especially mean governors and mayors — were states and cities. Christina Romer:

ROMER: Something we’ve learned from the 2008 crisis response was the value of giving money to state and local governments, that they are often an excellent sort of first line of response, because they can respond nimbly. They know what the problems are on the ground. And that is money you can get out quickly and it can get into the economy, into the hands of people who need it quickly.

Furthermore, states have their own fiscal obligations. Here’s Gary Cohn:

COHN: So, if you’re a state, a few weeks ago, you had, you know, single-digit people showing up asking for unemployment benefits and you had a very few people needing real health care payments. And then literally a week or two later, you could have had 150,000 people show up asking for unemployment benefits and 150,000 people needing medical payments that week.

And you as a state are obligated to make those payments — while simultaneously you’re having the federal government saying, “Hey, your income or your tax payments that were supposed to come in in April, oh, they’re not going to come in in April anymore. We’re going to delay tax payments for a couple of months.” So you put states in a short-term cash squeeze and the municipal-bond market says, “Whoa, if states don’t have any revenue and they have massive expenses, how creditworthy are they? And the municipal bond market will reflect their lack of creditworthiness.”

SUMMERS: State and local governments have balanced-budget requirements.

That’s Larry Summers — again, he’s a former Treasury secretary.

SUMMERS: Their tax revenues are going to collapse because they depend on sales taxes and nobody’s going to be able to go into a store. Their needs, on the other hand, are going to go up, and they’re not going to be allowed to borrow. The only entity that’s in a position to help fix that is the federal government, which can borrow.

And here’s Glenn Hubbard.

HUBBARD: I do think states need support and I would put it in two buckets. The first is for critical public-health infrastructure. The wrangling going on between Governor Cuomo and the president is reminiscent of that. The other is for Medicaid programs, which states have a match from the federal government. And I think more funds are needed there.

DUBNER: You know, we’ve been hearing about entire industries shutting down, millions of newly-unemployed workers, and so on. We know that. But what kind of economic damage are you worried about that’s happening either out of sight now or down the road? Whether it’s in insurance markets, the real-estate industry, I understand the muni-bond market in many states is a total mess.

BOOKER: Well, I think that we don’t know how this is going to change us culturally.

That’s Senator Cory Booker.

BOOKER: 9/11 changed the culture of our country pretty profoundly. And now, with the consciousness of pandemics and the chance for superbugs to emerge, I think that’s going to change. I think there’ll be some good benefits over this. I think the arguments for paid family leave, sick leave, is going to be greater.

ROMER: So we know a lot of brick-and-mortar stores were already pretty close to the edge.

Christina Romer again.

ROMER: We’d been moving much more to digital retail. And one question is whether this episode is really going to be the end of the shopping mall. And that is really important when you think about who those workers are. They’re not particularly high-income jobs. That’s going to be an important policy issue going forward, of how to get those people retrained and into other parts of the economy where they can earn a good, steady income.

COHN: So, you think of the unintended consequences, what does that do?

Gary Cohn again.

COHN: How do we think of large social gatherings? Are we comfortable? Are we going to be comfortable going to a Michigan-Ohio State football game where there’s 110,000 people sitting on rows of seats packed in with each other? You know, the airline industry over the last decade has made money by buying smaller, more efficient planes and densifying them, putting the seats closer and closer together. Are we going to be willing to sit closer and closer together on airlines?

HUBBARD: I would not be surprised to see changes in the way we work, the way we travel, long past the several weeks of lockdown.

Glenn Hubbard teaches economics and finance at Columbia, in New York City — but he, like the rest of us, has been working from home.

HUBBARD: The whole raison d’être, if you will, of modern life is openness and ease of commerce and travel and meeting with people. That is obviously a riskier set of activities than perhaps we had thought. You know, if you accepted the proposition that more meetings could be done online, then a given amount of office real estate could accommodate more people. So I wouldn’t rule that out at all, as well as the shift to more online banking and other things — you know, calling into question, perhaps a lot of branch real estate.

DUBNER: So there are other consequences, maybe familial or societal. Some people are wondering if domestic violence will rise as more and more families are spending their time in closer quarters. Some people posit a higher divorce rate.

HUBBARD: I actually think the opposite. I think that almost a blissful reconnection seems more likely, of people being able to see one another more often. I can’t remember a time when I had this many family meals in a row at home. And I actually find it very pleasant. I hope my wife does too.

BAICKER: This is certainly going to change the way most people think about health care permanently, but I don’t know in what way.

Katherine Baicker again.

BAICKER: This highlights the importance of everyone having access to lifesaving care. And it also highlights the interconnectedness of one person’s access to health care on the health of the whole community. But that’s not true for all health care. Our health is obviously most interconnected for contagious diseases and we are facing the dire consequences of lack of attention to that right now. For most health care, though, the person who benefits the most from access to care is the person who gets the care. So the lessons from how you finance health care for public-health threats may not apply in an obvious way to how you finance health care for diabetes or cancer.

And here’s Austan Goolsbee.

GOOLSBEE: So when you get in a crisis like this, where millions of people are losing their jobs and it automatically means they lose their health insurance, I think it is going to force — should force — a rethink. But I don’t have total comfort that it will. And the main reason I don’t is, at the depth of the financial crisis, I remember saying to the main political advisors, “This is awful. There’s nothing good about this. The only silver lining is that no one will ever again say that the answer is we should just deregulate the financial system and everybody should be left to do whatever they want because it led to this crisis.” And it literally was not 12 months before there were people back saying, “Oh, the problem of this is too much regulation. We need less.”

ROMER: Actually, I think a really important point is to not be trying to make permanent policy decisions in the middle of a crisis.

Christina Romer again.

ROMER: This is a unique time. Let’s deal with the problem now. I think it’s not the right time to be deciding what should our permanent unemployment insurance system look like? What should our permanent student-loan program look like? So I would actually hope that people view this for what it is, which is an incredibly important and valuable response to the current crisis. But then we need to still have a good, vigorous debate on what’s the right thing for the long term, what’s the right way to design your safety net, how do you want to deal with inequality?

The last question we asked our guests was — well, we asked if they had any good news. Any reasons for optimism, however fleeting or small. And the really good news was that the reasons they gave for their optimism were neither fleeting nor small. Here, in order of appearance, are Glenn Hubbard, Gary Cohn, and Austan Goolsbee.

HUBBARD: Well, it’s two things. One is just resilience. The economy has proven resilience through pandemics, through world wars, through social upheavals. I see no reason to believe that won’t be true now. And the second just is the very strong community spirit that I see in my own neighborhood and community and church, but also around the nation. So is it a good time? No. But are there things we can learn? Yes.

COHN: I think in many ways, this is going to make us a better country when we get done with this, because when you go through things that you think can never, ever happen to you — and I’ve gone through three or four crises in different businesses I’ve been in — the business always comes out stronger. It always thinks more broadly. It always is more prepared. And you’re willing to engage in conversation that, prior to going through a crisis, always would have thought it was a foolish conversation. I hope that the Congress and Senate and the executive branch will now start having much more realistic conversations about the future of the country, about the health of the country, and if they’re not willing to do it, that we as citizens are smart enough to vote in new leaders that are willing to have that conversation.

GOOLSBEE: Look, we know that this does not in and of itself have to destroy us. Right now, this is a very intense demand-driven recession, maybe if you want to think of it that way. There are plenty of beach towns that close down in the wintertime. There’s plenty of episodes where we have shutdowns and they don’t have to destroy us. We just — we’re scrambling a little because we didn’t expect this. And it came on suddenly. But if we get control of the virus, the spread of the virus, either with vaccines and treatments and innovation or respirators, ventilators, et cetera, or we do enough testing that we can only isolate the people who actually have the disease and everybody else can go back to work — any of those things, if you get control of the virus, the economy is not fundamentally flawed. It can definitely come back. We can definitely put this behind us. And we’re going to remember this. This was a really wacky time that nobody expected, and there never was anything like it before. And let’s hope there’s never anything like it again.

*      *      *

Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Alison Craiglow and Matt Hickey; we had help this week from James Foster. Our staff also includes Greg Rippin, Harry Huggins, Zack Lapinski, Daphne Chen, and Corinne Wallace; our intern is Isabel O’Brien. We had help this week from James Foster. Our theme song is “Mr. Fortune,” by the Hitchhikers; all the other music was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.

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In a previous post, I estimated how real estate performs at various levels of a stock market decline. In my opinion, the sweet spot for real estate outperformance is somewhere between a 15% – 25% stock market decline. During such a level of decline, mortgage rates tend to fall as investors buy Treasury bonds. As

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