COVID-19 stimulus is a good start, but more is needed, says Berkeley economist

April 6, 2020
By: Public Affairs
An empty Chicago streetscape during the COVID-19 shutdown
The streets and offices of Chicago and many other major economic centers were shut down during the COVID-19 pandemic. (Photo by Reed Mansour via Flickr/CC by 2.0)

Lawmakers in Washington, D.C., have taken strong first steps to provide economic support to businesses and their workers suffering from COVID-19-related shutdowns and unemployment, said Jesse Rothstein, UC Berkeley professor of public policy and economics. But Rothstein advised that more will be needed to protect vulnerable small businesses and employees from the impact of the pandemic.

Jesse Rothstein, professor of economics and of public policy.
Jesse Rothstein is a UC Berkeley professor of public policy and economics.

In an interview with Berkeley’s Goldman School of Public Policy, Rothstein cited a range of new challenges following Washington’s passage of a historic economic stimulus package:

Effective communication will be needed to assure that businesses can understand the aid program and implement it quickly. The aid must get to employers quickly, so that it can be passed on to their employees. And the federal government may need to provide new support to state unemployment insurance systems overwhelmed by the sudden wave of tens of millions of applications.

“The big missing piece [in the stimulus measure] is that there’s just not enough money to bail out states,” explained Rothstein, former chief economist at the U.S. Department of Labor. “We’re bailing out workers and companies as best as we can — but the hit to state budgets is going to be enormous. While there’s some money included for states, we’re going to need much more of it.”

Rothstein served in the labor department under President Barack Obama. At Berkeley, he is director of the Institute for Research on Labor and Employment (IRLE). He has been a prominent voice calling for pragmatic government support to businesses and their workers to offset the devastating impact of the slowdowns and shutdowns resulting from the global health crisis.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides an estimated $2 trillion stimulus package to counter the vast economic effects of the pandemic. Rothstein questioned whether the $500 billion set aside to support large businesses “is likely to be largely wasted on propping up stockholders.”

However, he said: “We need corporations alive. … We absolutely need to bail out small business owners. No small business owner should have been setting aside savings for this. They should have a rainy day fund, not a Noah’s flood fund.”