Now that we are finally going on lockdown here in the US in order to flatten the curve of the COVID19 crisis, we also need to take drastic measures to put the economy on suspended animation. In particular, I propose the following for the duration of the lockdown:
Suspend all interest, mortgage, rent and similar payments
Permit companies in non-essential industries to suspend wage payments.
Pay everyone a Universal Basic Income of $600/month
Federally back all health insurers and in return force them to pick up all testing and treatment expenses
The goal of these measures would be to avoid personal and business bankruptcies across the economy. At present course these would decimate small businesses and further exacerbate the income and wealth inequality.
For individuals the biggest expenses by far tend to be rent, food and healthcare. Each of these is covered by one of the points above. Rent or mortgage payments are suspended as per #1. Food can be purchased from the UBI paid under #3. And healthcare is covered under #4.
For small businesses, the bulk of fixed costs are rent, interest payments and wages. Rents and interest payment would be suspended under #1, wages could be stopped under #2.
What would happen to real estate companies and lenders under this scenario? The biggest expense for real estate companies themselves turns out to be interest payments. They would stop receiving rents but would no longer need to pay interest. Should be survivable. For lenders this would be a great situation also. Right now they are facing the loss of principal on a lot of loans but under this scenario while interest payments are suspended, there is a much higher likelihood of the recovery of principal.
Sidenote: why am I proposing less than $1,000 for the UBI? Because the other measures eliminate key expenses for many people.
Is this realistic? Well in the absence of a crisis that could result in millions of deaths in the US alone not. But under present circumstances feels doable and other nations are already headed in this direction, with France suspending rent payments.
Addendum: Some clarification based on Twitter responses. By “suspend” payments I really mean suspend without a later catch up. Instead the elapsed time should be added to contracts. So for instance if you have 36 months of interest payments in total you will still have 36 months, just with a 2-3 months break in there.
