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Former Obama Economic Adviser Says It's Possible To Avoid Another Depression


The U.S. economy is at a halt. An unprecedented number of Americans have filed for unemployment in the second month of the coronavirus pandemic, and many believe that not just a recession, but a depression is looming. No reason to get ahead of ourselves, though.

Cecilia Rouse, dean of the Woodrow Wilson School of Public and International Affairs at Princeton and a former Obama economic adviser, says that another Great Depression can be avoided. She joins us now. Dean Rouse, thanks so much for being with us.

CECILIA ROUSE: Thank you. It's a pleasure.

SIMON: We've never seen so many people become unemployed so quickly. It distorts the charts. Wouldn't seem to be alarmist to think a depression follows.

ROUSE: Well, what we see - and the reason that we see the number of initial claims for unemployment just skyrocketing is because, as you mentioned in your introduction, the economy has come to a halt. And what is so unusual about this situation we find ourselves in is it was not caused because of a problem in the economy.

The reason I believe that a Great Depression can be avoided is because our government, especially our federal government, can respond, and it is starting to do so. And so if our federal government helps individuals, helps our businesses to have the liquidity, to have the money that they need to get through this pandemic, or at least through the worst of it, then we can get started again.

SIMON: The hope seems to be, of course, a lot of these job losses amount to job suspensions and that employees can quickly be hired back. But is it a little Pollyannish to think that a lot of the jobs will still be there?

ROUSE: I sincerely hope not. If we can get the aid to the businesses, especially the small businesses who typically do not have the revenue and the cash on hand to get through many weeks without having revenue, then we can get there. My concern and the reason why it may be a little Pollyannish is because while Congress has passed the CARES Act and there is money allocated for businesses, what we're seeing is that it's extremely difficult for them to actually get it.

SIMON: Well, what more can the federal government do?

ROUSE: Well, I think right now, the federal government needs the systems to be able to push the initial tranche of money out. I heard from one sole proprietor that the Paycheck Protection Program was just opened up, and he was describing how just very painful it has been for him to try to get access to the funds. So we need more resources for the IRS to be able to handle their part, the SBA to handle their part and the banks, as well.

SIMON: I must say, on the one hand, you have people discovering what - new ways in which a federal government can certainly be useful and vital in our lives. But isn't the whole idea of paying people from money that's already authorized, or the slowness of that, exactly what some people complain about?

ROUSE: It is. And this is part of what I do hope we as a country can learn from and maybe - and do better in the future. I have not been hearing the same complaints in some other countries where they are having to also keep their economy floating by protecting the employers and maintaining the relationship between employees in their firms. I'm not hearing the same ineptitude, if you will.

SIMON: Do you see these shortcomings as being endemic to the U.S. financial system or the way this administration and perhaps other parts of government have been handling it?

ROUSE: The part that I'm interested in and I've been thinking about is I do believe it very much reflects our way of constructing a safety net or what really is kind of an absence of a safety net. We have traditionally tied our safety net to employment, so if health insurance is typically provided by your employer, paid sick leave is provided by some employers. And I think it's important for us to understand what is the proper role for government here. And I think we need to have a stronger safety net that is not so tied to employment so that we have the systems in place to better support and better react when we have emergencies such as this.

SIMON: Cecilia Rouse, dean of the Woodrow Wilson School of Public and International Affairs at Princeton, thanks so much for being with us.

ROUSE: You're very welcome. Transcript provided by NPR, Copyright NPR.