NEW YORK (WCBS 880) — Millions of Americans received their part of the massive $2.2 trillion stimulus bill this past week.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act), which President Donald Trump signed into law in March, includes a one-time payment of $1,200 for many adults, as well as expanded unemployment benefits and relief for small business owners.
Once people began receiving the checks though, they had just one question to answer: How should they use the money?
Joseph Stiglitz, a Nobel Prize-winning economist from Columbia University, says it’s unclear how long the pandemic will last for, and Americans would be wise to stretch the money for as long as they can.
“Personally, what I would do is, obviously spend what you need for food, for shelter, but you save as much as one can for a rainy day,” he explains.
Stiglitz continues: “Right now, the problem with our economy is not the lack of aggregate demand. It’s that everybody is sheltering at home, that means they're not either producing or consuming. There's an advantage for the economy as a whole of hovering resources, it means when the pandemic is over, we'll have the purchasing power to provide the stimulus to the economy would need at that time.”
He recommends people hold on to their money until society reopens in order to help the economy fully recover. However, he recognizes that is a luxury many people do not have.
“A very large fraction of Americans are living paycheck to paycheck and so they don't have the luxury of answering the question that you asked. They need the money just to get by. It says something about where America's gone with a high level but inequality that such a large number of our citizens are living paycheck to paycheck,” Stiglitz tells WCBS 880’s Steve Scott.
While the professor previously indicated that this current economic downturn could potentially be worse than the Great Depression, he says now that the current trend is “much more precipitous” and there is a chance for recovery.
“It will recover. I feel confident of that. One of the questions is, how long it will take? It took a very long time to recover from the Great Depression, fact it was a war that got us out of that slump. That tells us something also, that policy will matter. The policies that we put in place have not been up to the task and we need stronger economic policies and it's not clear we will be able to get those stronger policies under the current political environment,” Stiglitz said. “If we don't get those stronger policies we will be looking forward to a period of very weak economic performance.”
He says getting out of the slump and recovering will mean “strengthening the public sector, strengthening the investments in science and strengthening our investments in preparedness.”