Former Chief Economist at the White House Council of Economic Advisers Jay C. Shambaugh joins Yahoo Finance’s Zack Guzman to discuss how a $1.5T stimulus could help Americans.
ZACK GUZMAN: It has been months now since that additional $600 in unemployment benefits at the federal level rolled off at the end of July. And a lot of workers out of work here had depended on that money.
And yet, despite the fact that that's not there anymore, we have not seen Republicans and Democrats come back together to pass a stimulus bill that would support those benefits that rolled off. Or perhaps the other things that they've agreed to so far in negotiations before those broke down, including another round of $1,200 stimulus checks to support those across America that qualify.
And now, a new program here, a new plan for moderate Republicans and Democrats launched to get a $1.5 trillion bill through here on some of those key points that both sides do agree to has still stalled here and not gotten negotiators back to a point of getting in a position to get that stimulus bill through.
Here in a new op-ed published in "The New York Times" here is calling on both sides to maybe use it perhaps not as the final point here, but again, a starting point to get both sides back to the table. And the author of that oped joins us now, Professor of Economics and International Affairs at George Washington University and Former Chief Economist at the White House Council of Economic Advisors from 2010 to 2011, Jay Shambaugh, joins us now.
And professor, thanks for coming on here. I mean, to your point, you're not saying this is the perfect compromise here. It's a starting point to re-trigger those negotiations. But a lot of it at the heart of this bill is what Republicans and Democrats already agree upon.
JAY C. SHAMBAUGH: I think that's right. I think there's a lot of really important pieces in the bill. And you can always kind of debate the final wording over any one piece of it.
But you know, what it's got in there is more aid to the unemployed, aid to state and local governments who are desperate for some financial help right now because they've lost so much tax revenue, more money for SNAP-- what used to be called food stamps, because hunger is spiking-- more money for small businesses, and those direct checks that you mentioned going to everybody. So it's got a lot of the core pieces that we need.
There's also actually one thing that I really was glad to see in it is it's got some triggers, as they suggest, where you say, OK, look, if things look bad, we'll continue the money for a little bit longer. If things get better faster magically, fine, then we spend a little bit less. And doing that kind of automatic fiscal policy instead of having to fight it out every two months is one way you could maybe have the right amount of support we need for the economy going forward.
But you're right, I think it's kind of the framework where maybe both sides could come together and talk. The Democrats have said openly in the House, we will compromise. We'll come down from our number.
I think what they're waiting for at this point, honestly, is I think there's a lot of debate within the Republican Party about where they want to be in the negotiations. And you need both sides, because I would just say, you know, we're still down over 11 million jobs from where we were in February.
One in five households with kids over the summer said that their kids didn't have enough to eat because they didn't have enough money to feed them. And that's just a shocking statistic that says there is a massive amount of pain out there in the US, and we need to do something.
ZACK GUZMAN: Yeah. And it's also shocking to see that statistic and still see both sides here not getting to the table to get this done.
But to your point on those triggers, the political-- obviously, we're close to the election. So politics is running high on both sides here. But that idea would seem to remove what you're saying in terms of regardless of which party is in power, come post the election it's still going to be tied to what aid is needed there tied to these economic factors.
So I mean, talk to me about what those sticking points-- I mean, we know that a lot of the aid back to states, President Trump has not wanted that. But talk about the sticking points here that seem so small when you address the problem you just talked about here that's so big.
JAY C. SHAMBAUGH: I think some of it is just a disagreement about how much you want to have the government helping the economy. I think you definitely saw some people, Republicans in the Senate, saying they thought the aid to the unemployment was the thing holding back the economy.
I will tell you, as an economist I disagree with that. I think we have far more unemployed people than there are jobs available. And we have a lot of people who can't work because of the pandemic. And so we need to be supporting those people so they have some money to spend.
But I think there were some people out there who just worried we were paying people not to work, and that was going to keep the economy from generating jobs. So I think that is one disagreement you sometimes see out there.
And then as you mentioned, there's a lot of disagreement about the aid to states and local governments. I don't think there's disagreement at the state and local level. Whether you're a Republican or a Democrat, they know they need some help. There is disagreement about how much help they want to provide from Congress right now.