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Fed’s Bullard: Coronavirus shutdown not a recession but an investment in survival

first_imgThey must also be coupled with massive federal government support to sustain the population through its coming isolation and prime the economy to pick up where it left off.To Bullard that means:Match any lost wages.Match any lost business. In normal times massive unemployment and a collapse in economic output would be tragic.This time, as the coronavirus cloisters millions of Americans and shuts down the US economy, it should instead be saluted as an investment in public health that lays the groundwork for a rapid rebound.That is the view of St. Louis Federal Reserve President James Bullard, who argues that a potential US$2.5 trillion hit coming to the economy is both necessary and manageable if officials move fast and keep it simple. It may seem an unconventional view in a moment of global anxiety, but Bullard argues the shutdown measures now being rolled out are essential to shortening the course of the pandemic. No questions asked.No arguments about bailouts or “moral hazard” – the sticky issue of publicly funded rescues of bad actors.And, above all, when the losses are tallied, don’t call it a recession.Recessions are the ordinary – even predictable – contractions in activity that mark the end of normal business cycles. Bullard, who has earned a reputation inside the Fed for a penchant to rethink problems and reframe debates, said this is anything but.“Frame this as a massive investment in US public health,” Bullard said in a Friday telephone interview.”Crazy heavy” jobless claims? That’s OK.Bullard’s comments came as US lawmakers debated emergency economic measures worth $1 trillion or more, a figure Bullard says may underestimate what’s needed.Nonetheless it is still opening old wounds from the 2007-2009 economic crisis over who deserves what, whether corporations should get help, and how generous the government should be with workers.The spread of the coronavirus has touched off those discussions worldwide, but with an urgency that is shredding old hesitancies. United Kingdom Prime Minister Boris Johnson’s government on Friday announced it would pick up 80 percent of the national wage bill for the next three months.Many Fed officials have called for a stronger US fiscal response in recent days, but Bullard went a step further with an explicit call for the US government to match what is being lost dollar for dollar.For now, he said, economists and policymakers should turn their view of data on its head because little will make sense otherwise.The recent jump in unemployment claims? That’s a win, a sign that so-called government stabilizers are being used. The hope should be that such programs get “crazy heavy use” in coming weeks, he said.If economic output falls by half in the second quarter, that’s a win – not a record-setting defeat. It means businesses have heeded orders to close and customers to stay home.“We are not trying to move production and income up in the second quarter. We are trying to keep it out of the second quarter,” Bullard said.“You want capital to just sit in place. Switch off the factory … Then switch it back on.”30 percent unemployment a possibilityBullard was among the large group at the Fed who at first felt the virus risk would pass with little economic damage, as have other similar health scares such as SARS and ebola.They are all now trying to catch up, with emergency rate cuts, extensive new programs to keep markets working, and other steps to aid an economy grinding to a halt.In line with his colleagues, he said he was ready to do more, including putting more of the Fed’s direct lending powers to work if needed.“It is early days and we are willing to do more. I am willing to do more,” he said.Bullard was blunt about the dilemma posed, saying the economics profession was “reeling” as it tries to understand what is taking place.For now what’s usually good – jobs and production – are bad, and the headline numbers are going to be staggering.Bullard’s ballpark estimate is that unemployment could hit 30 percent, higher than in the Great Depression and three times more than the 2007-2009 recession. Output in the second quarter could be half the norm, a hit of about $2.5 trillion.That is unavoidable if the virus is to be contained through “social distancing” or government orders to stay at home.Illustration of economy class seats on an airplane. (Shutterstock/ vvoe)Keep everyone wholeAll this needn’t wreck the economy. Legislation working its way through Congress has begun to roll out some support.Bullard said the “core aim” can be kept simple: “keep everyone, households and businesses whole through the second quarter.” Do it with a quick expansion of unemployment insurance to cover lost wages, and through grants and loans to business to cover losses from “unemployed” capital.From a macroeconomic standpoint, he argues, it is a tractable problem.Again using back of the envelope math and a 30,000-foot view, he said perhaps half a trillion dollars of lost output will be accounted for by necessarily lost consumption – all the movie tickets and clothes no one buys and trips people will not take.As to the other $2 trillion, Bullard said the federal government should borrow and distribute it to people and business.“That is completely feasible,” in service of limiting economic damage, he said. “This is a planned, organized partial shut down of the US economy. We are throttling back output on purpose to meet health guidelines… Transfer income to affected households.”“Call it pandemic relief,” Bullard said. “Get transfers to businesses that are affected heavily, and come out on the other side. Identical economy. Produce the same goods as before.”Topics :last_img read more

Spring Football: Defense shines in 2nd scrimmage

first_imgStephanie Moebius / The Badger HeraldConor O’Neill, from the beaches of Florida and reputable St. Thomas Aquinas High School, came to Wisconsin as one of the most hyped recruits UW head coach Bret Bielema had managed to secure.Somewhat surprisingly, O’Neill went four semesters in the program without finding his way onto the field for any serious playing time, as he found himself without a position to suit his athletic combination of strength and speed.It may have taken longer than most expected, but O’Neill appears to have finally found a home.O’Neill intercepted two passes on two consecutive plays Saturday during UW’s live scrimmage at Camp Randall. It was just the peak of what has been an extremely impressive spring camp for the redshirt sophomore as he transitions from safety to linebacker.“I thought Conor made a big jump,” Bielema said. “Conor was a heavily recruited kid a few years ago; we tried him at safety because we knew he had ability, but I think that may have really helped him out because he is good in the passing game. He has a good understanding of where he needs to be in the zone fits, and he gets his hands on a lot of balls.”An Extra Inch Or Two Wouldn’t HurtJon Budmayr had another uneven day, unofficially going 7-for-15 with a 52-yard bomb successfully completed to Jared Abbrederis. However, Budmayr also threw an interception into the hands of linebacker Mike Taylor.As he has been struggling with all camp, Budmayr had two passes batted down at the line – both by David Gilbert – that hindered his effectiveness.While Budmayr undoubtedly has the best arm of the quarterback bunch, his short height and tendency to force throws that become interceptions has prevented him from running away with the starting job.Still, Bielema is not too concerned about the batted balls at the line.“I think similar to when we had [Tyler Donovan], who was a [short] in the pocket guy,” Bielema said. “So if Jon was the guy, we could do some stuff conceptually to help eliminate that.”Starting Right Tackle?For the third practice in a row, freshman right tackle Rob Havenstein lined up with the starters all day. When spring ball opened up, redshirt sophomore Casey Dehn started at right tackle.With Josh Oglesby still returning this fall, neither Dehn nor Havenstein is expected to start, but the battle for the backup position remains wide open.Bielema noted while both have improved, they are nowhere near the playing level of the other four line spots.“Robbie has done some nice things,” Bielema said. “Casey [Dehn] had an opportunity to run with the ones, and I think [Bob Bostad] was seeing what would come out of that. I would say the both of them have gotten better but are not yet at the level we need them because at the other four spots we are pretty solid.”Not Done YetAfter redshirting last year for what would have been his final practice, Zach Brown has to battle in a crowded backfield yet again if he is to receive any playing time this year.Brown knows he has to work harder than Montee Ball or James White if he will ever see significant game action again.Saturday, Brown accounted for two touchdowns (one running, one receiving) and unofficially accounted for 47 yards on 10 carries. Most impressively, he ran with forcible violence in his limited action.“Zach is an angry running back,” Bielema said. “I think he is a guy who everyone wants to talk about those other guys, and people forget that he ran for 200 yards his freshman year and won some games for us … if he is our power back, that is great.”Extra PointsPutting on third down situational drills, the defense handily beat the offense, preventing a third down on 17 of the 24 third-down plays. … The second string offensive line especially struggled with pass protection Saturday, giving up a plethora of sacks on blitzes and straight four-man rushes alike. … Ryan Groy and Joel Stave fumbled an exchange yet again, a reoccurring problem with Groy this spring. … Peniel Jean made the play of the day, intercepting Stave with an acrobatic grab in mid-air as Jean fell to the ground.last_img read more