We’ll Bounce Back Faster If We Pay Workers to Do Nothing

The U.S. government’s first economic relief bill to cope with the coronavirus shutdown was a stopgap measure. With employment in a free fall and businesses shutting down across the country, Americans needed money in their pockets as fast as possible. Without the time to figure out the optimal policy, the government turned to an existing system that was in place and ready to go: unemployment insurance. Millions of newly unemployed Americans now use these benefits as an economic lifeline.

There were many problems with this approach -- for example, the unemployment-insurance system has been swamped, which will delay the day when people start getting money. But the biggest problem is that allowing millions to lose their jobs, even if they get checks in the short term, sets the economy up for a depression after the shutdowns end.