With the economic forecasts from the coronavirus deep freeze becoming more dire by the day, United States Treasury Secretary Robert Mnuchin on Tuesday declared his intention to get a cheque quickly to all American citizens.
“We are looking at sending cheques to Americans immediately,” Mnuchin said during a news conference at the White House, standing beside US President Donald Trump and the rest of the coronavirus response team.
“Americans need cash now and the president wants to get cash now,” Mnuchin added. “And I mean now, in the next two weeks.”
After his comments during the briefing, Mnuchin made a hasty exit to Capitol Hill to finesse the details of the proposal first with Republican and then, Democratic members of the US Congress.
While the mechanics of the programme have yet to be ironed out, payments could amount to $1,000 for every American – with the likely exception of wealthy individuals.
Distributing government cash handouts to everyone is not a new idea. The influential neoliberal economist Milton Friedman coined the term “helicopter money” in the late 1960s as part of a thought experiment to imagine how a one-time-only, universal cash injection could boost consumer spending.
The term came back into vogue in 2002, when former US Federal Reserve Chairman Ben Bernanke alluded to it in a speech on tackling deflation, earning him the nickname “Helicopter Ben”.
Since then, the idea has popped up and even been put into practice in limited form during times of extreme economic stress.
A new generation was introduced to a variation of the helicopter drop by former 2020 presidential candidate Andrew Yang.
Yang has vigorously endorsed the idea of direct cash transfers to everyone, but unlike free-market evangelist Friedman, he does not see sprinkling free cash around as a one-off exercise.
Yang endorses a “universal basic income” – a monthly stipend with no means testing – to help Americans whose needs are not met by either employment compensation or government assistance.
On Monday, US Senator Mitt Romney picked up the baton, pressing his fellow legislators to adopt a temporary helicopter drop to counter the economic danger posed by the coronavirus outbreak.
The day before the Trump administration trotted out its helicopter idea, Yang, who is now a cable news network commentator, upped the ante by suggesting that the US government should commit to $1,000 a month for the duration of the crisis, given that the US Centers for Disease Control and Prevention has already said the public should avoid gatherings for at least the next two months.
The US central bank, the Federal Reserve has unleashed a litany of crisis measures to shore up the economy against the onslaught of coronavirus disruptions, including slashing interest rates to near zero and restarting its financial crisis-era bond-buying programme.
But the Fed cannot do it alone. Myriad analysts and economists countering the economic disruptions caused by the coronavirus crisis demand both monetary policy and fiscal stimulus.
“Lower interest rates will not encourage firms or households to invest more when the economy is in the deepest recession since the Great Depression,” said Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute.
“The key to recover is to rapidly pass a massive fiscal stimulus,” Scott told Al Jazeera. “Tax cuts will not help – they would go primarily to wealthy households who [already] have sick leave and cash reserves, so those tax cuts would not be spent.”
“We need to get money directly to families that would be hurt by layoffs, whose mortgages, rent and ability to buy groceries would be at risk,” he added, saying that the government should limit such assistance to those truly in need.
Scott believes government cash handouts should be limited to working-class families earning less than the median US household income adjusted for inflation – $63,179 in 2018.
Scott also cites the limited success of the 2008 government stimulus package that sent rebate cheques of up to $600 a person and $1,200 a family, with $300 more for dependent children under 17.
Back then, there was a two-month lag between inking the bill and the cheques being mailed. Remember, Mnuchin wants cheques to go out within the next two weeks.
But Scott thinks $1,000 is too low. He says as much as $1,500 for children and $3,000 for adults would make sense, automatically repeated every two months for the duration of the crisis.
Yang said in a statement from his non-profit, Humanity Forward, that he is “pleased to see the White House adopt our vision of putting money directly into the hands of hard-working Americans”.
Edward Alden, a senior fellow at the Council on Foreign Relations, said he was encouraged by the momentum a helicopter drop has gained – in the legislative and executive branches of the US government.
“A lot of people will feel the financial pain of this very quickly,” said Alden. “Unemployment insurance is worthwhile, but you have to wait until you’re unemployed, and it doesn’t apply to gig-economy, part-time workers.”
“Direct cash payments are the way to go,” Alden told Al Jazeera, citing recent positive comments on the subject by Jason Furman, chair of the Council of Economic Advisers under former US President Barack Obama.
“You’ll have to do this monthly to stave off the downturn,” said Alden, adding that “money is almost free now” in an era of very low interest rates when the government can borrow what it needs with little risk of inflation.
He also hopes a helicopter drop will prompt a wider rethink about a patchy US social safety net.
“I am hoping that this will finally make Americans rethink the hopeless inadequacies of their safety net, lack of healthcare and sick leave,” said Alden. “All the holes are so obvious in a crisis like this.”