We need a Phase 4
What is the proper economic response to the coronavirus pandemic? Fear of infection and quarantines imposed by state and local officials have led to a severe contraction in spending and employment. In response, Congress has passed three bills: a Phase 1 bill provided funding for health agencies and testing, a Phase 2 bill offered benefits for employers to expand paid sick leave, and the omnibus Phase 3 bill massively expanded unemployment benefits, sent checks to the majority of households and provided funding for the Federal Reserve to lend to businesses, among other things. All of these bills have been termed as “stimulus” necessary to boost the economy out of a recession. One standard framework for understanding recessions is the aggregate demand - aggregate supply model (AD-AS). Aggregate demand can be thought of as the sum of all spending in the economy. The typical recession in the United States is caused by a shortfall in aggregate demand. For example, the collaps...