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      The Guardian view on Covid relief: ideologies matter in democracies | Editorial

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      When Covid struck, it was governments that decided people could not go to work and governments that took people’s money away. It is now down to governments to decide whether or not to return that money and when to open up the economy. In the US, Democrats want to give generously. While $1.9tn dollars is a lot of money – about the size of Canada’s GDP – it probably is not enough.As Randall Wray of the Levy Institute has pointed out, the US government is engaged in relief, not stimulus, spending. It is offering much-needed assistance to the devastated balance sheets of households, school districts and local governments. Rescuing public services, making sure people don’t starve and building Covid-testing systems is not an economic stimulus but a necessary antidepressant. Reducing the size of the relief package would prolong the recession, which, given the virus’s capacity to surprise, may last longer than the experts predict. President Joe Biden was right to rebuff criticism that Democrats risked overheating the economy, saying the problem was spending too little, not too much. There is slack in the US economy: 400,000 Americans left the labour market in January.Mr Biden aims to control the virus and then create jobs with infrastructure investments to reinvent the post-crisis economy for a zero-carbon world. Call it a spend-then-tax policy. If he succeeds, Mr Biden will go some way to repudiate the conventional economic wisdom that argues that if governments keep borrowing too much, they risk defaulting, will end up printing money and be forced in a panic to put up interest rates. The pandemic revealed this to be bunk. Central banks can keep interest rates low by buying government bonds with money created from thin air. Last year, they bought 75% of all public debt.Within days of assuming power, Mr Biden had a plan, and new thinking, to rebuild a Covid-scarred country. Boris Johnson has little to show after months. His government intends to cut universal credit, raise council tax bills and freeze public-sector pay, weakening household finances. Given this mindset, which has dominated policy since 2010, it is hardly surprising that the £900bn of Bank of England “quantitative easing” money sitting with banks can’t find profits in the real economy. The Bank has “knowledge gaps” about QE. Yet there is truth in the quote attributed to Keynes that “you can’t push on a string” – when demand is weak, monetary policy can do little about it.With interest rates low, no recovery to invest in and no new regulations, UK banks will turn inwards, not outwards. Instead of the City contributing to the productive economy and a just green transition, expect speculation and Ponzi-like balance sheets. It is lobbying to expand lucrative but socially useless activities. In January, Tory peers with City interests argued for a new finance regulator with a “competitiveness” objective – a Trojan horse for deregulation.Central banks are creatures of their legislatures, but have been permitted, for ideological reasons, to work without a social contract. In her recent paper, Revolution Without Revolutionaries, the economist Daniela Gabor warned that unelected technocrats must not be allowed to hand politicians reasons to adopt external constraints that can be blamed for unpopular policies. It is timely advice. The UK will have record peacetime levels of debt. Rishi Sunak says such borrowing is “unsustainable”. Yet UK gilts are a risk-free financial asset, which is why banks crave them.The inequality, financial instability and ecological crises have multiple causes, but their existence is built on radical, free-market economics. It is not the case that the government’s ability to spend is temporary while interest rates remain low, as Mr Sunak claimed. Bond-purchasing programmes can control yields. A system that benefits private finance but subordinates the state and threatens to expose it, post-pandemic, to austerity and elevated levels of unemployment must be resisted. Only those unable or unwilling to believe the evidence of their own eyes would say otherwise. More

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      US economy adds 49,000 jobs as Biden aims for further Covid relief

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      The US economy added back 49,000 jobs last month as coronavirus restrictions eased and fiscal stimulus from Washington goosed up the economy, the labor department announced on Friday.The unemployment rate dropped to 6.3%, down significantly from its pandemic high of 14.7% in April. While January’s figure marked a return to growth after job losses in December, the number was weak and big problems remain.On Thursday, the labor department said 779,000 people filed new unemployment claims last week, down from the week before but still close to four times pre-pandemic levels. The latest figures showed some 17.8 million Americans are still claiming unemployment benefits.In December the US lost 140,000 jobs as the latest wave of Covid-19 infections led to more shutdowns across the country and a slowdown in economic activity. That figure was revised to a loss of 227,000 jobs on Friday.Professional and business services (up 97,000 jobs) and local government (up 49,000) saw the largest gains over the month. The US is still losing huge numbers of jobs in leisure and hospitality (down 61,000) and retail (down 38,000) and the stark gap in racial unemployment rates remains.The unemployment rate for white Americans was 6% while for Black Americans it was 9.2% and for Latinos it was 8.6%.The jobs figure come as the Biden administration is trying to push through a $1.9tn stimulus package which would send $1,400 cheques to many Americans and provide fresh aid for struggling businesses. It would also increase the federal minimum wage from $7.25 to $15 – the first increase since 2009.The plan has widespread support from voters, with a Quinnipiac survey showing more than two-thirds of respondents in favor of the plan. But it has met with opposition from Republicans in Congress, who have balked at the size of the stimulus and proposed a far smaller package. Biden’s plan was approved in the Senate early Friday by a 51 to 50 vote, with the vice-president casting the tie-breaking vote, but still faces hurdles and is not expected to become law before mid March.The recovery in the jobs market may embolden opponents but some economists warned that the economic toll of the virus is far from over.Jason Reed, assistant chair of finance at the University of Notre Dame’s Mendoza College of Business, said: “We shouldn’t forget that the economy is still down about 10m jobs since the start of the pandemic. We aren’t anywhere close to where we were this time last year.“The rollout of the vaccine will surely help Americans get back to work, but we shouldn’t expect a return to normal until late 2021 or early 2022.” More

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      Kamala Harris uses casting vote to pass Covid relief budget resolution

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      The US Senate has passed a budget resolution that allows for the passage of Joe Biden’s $1.9tn (£1.4tn) Covid-19 relief package in the coming weeks without Republican support.
      The vice-president, Kamala Harris, broke a 50/50 tie by casting a vote in favour of the Democratic measure, which sends it to the House of Representatives for final approval. It marked the first time Harris, in her role as president of the Senate, cast a tie-breaking vote after being sworn in as the first female vice-president on 20 January.
      The House passed its own budget measure on Wednesday. Congress can now work to write a bill that can be passed by a simple majority in both houses, which are controlled by Democrats. Mid-March has been suggested as a likely date by which the measure could be passed, a point at which enhanced unemployment benefits will expire if Congress does not act.
      The vote came at 5.30am on Friday at the end of a marathon Senate debate session, known among senators as a “vote-a-rama”, a procedure whereby they can theoretically offer unlimited amendments.
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      Biden is scheduled to meet with Democratic House leaders and committee chairs early on Friday morning to discuss the Covid economic stimulus, and is expected to make public remarks on the progress at an 11.45am EST (1645 GMT) briefing.
      There was dissent from Republicans in the Senate overnight, particularly over plans for a $15 federal minimum wage. Iowa’s Republican senator, Joni Ernst, raised an amendment to “prohibit the increase of the federal minimum wage during a global pandemic”, which was carried by a voice vote.
      The Vermont senator Bernie Sanders said he still intended to support bringing the measure through: “We need to end the crisis of starvation wages in Iowa and around the United States.”
      He outlined plans to get a wage increase, phased in over five years, included in a budget reconciliation bill. The federal minimum wage is currently $7.25 an hour, and has not been raised since 2009.
      In a tweet after the vote, Sanders said: “Today, with the passage of this budget resolution to provide relief to our working families, we have the opportunity not only to address the pandemic and the economic collapse – we have the opportunity to give hope to the American people and restore faith in our government.”
      During the debate Senate minority leader Mitch McConnell said “This is not the time for trillions more dollars to make perpetual lockdowns and economic decline a little more palatable. Notwithstanding the actual needs, notwithstanding all the talk about bipartisan unity, Democrats in Congress are plowing ahead. They’re using this phony budget to set the table to ram through their $1.9 trillion rough draft.”
      The $1.9 trillion relief package proposed would be used to speed Covid-19 vaccines throughout the nation. Other funds would extend special unemployment benefits that will expire at the end of March and make direct payments to people to help them pay bills and stimulate the economy. Democrats also want to send money to state and local governments dealing with the worst health crisis in decades. More

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      Biden and Yellen urge Democrats to go big and bold on Covid relief package

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      Joe Biden and his new treasury secretary, Janet Yellen, are encouraging Democrats in Congress to go big and bold on the Covid-19 relief package and have effectively panned a Republican alternative that is less than a third the size of the president’s $1.9tn rescue plan.Senate Democrats took steps on Tuesday to push ahead with the huge bill, with or without Republican support, despite the ostensibly amicable bipartisan talks at the White House the day before.Chuck Schumer, the Senate majority leader, warned that the coronavirus crisis could drag on for several years unless maximum effort for large-scale relief is made on Capitol Hill.Democrats voted to launch a process that could approve the sweeping rescue package on their own if necessary.On Tuesday, Biden and Yellen joined the Democratic senators for a private virtual meeting and both declared the Republicans’ $618bn relief offer too small.They urged ambitious and fast action to stem the coronavirus pandemic crisis and its economic fallout.Biden on Wednesday was meeting with congressional Democrats. In a call-in to the weekly meeting of Democratic representatives he said he was willing to consider tighter limits on who gets $1,400 direct payments under his Covid-19 relief plan but not the size of the checks, CNN reported.The president invited incoming Democratic chairs of some key Senate committees to the Oval Office.“This is their new home for a while anyway,” Biden said. “And with a little bit of luck, the grace of God and the goodwill of the neighbors, and the crick not rising, it’s going to be longer than just four years.”Asked whether he believed any Republican lawmakers would support his relief proposal, Biden replied: “I think we’ll get some Republicans.”“I think we’ll get some Republicans,” Biden told us in Oval, referring to GOP votes on latest coronavirus stimulus spending plan. pic.twitter.com/VrZXudKJQh— Jennifer Jacobs (@JenniferJJacobs) February 3, 2021
      Earlier, Senators Chris Coons and Tom Carper of Delaware emerged from an hour-long meeting with Biden at the White House.Carper said the trio discussed the need to confirm Biden’s cabinet nominees, as well as president’s coronavirus relief proposal.Coons pushed for financing global vaccine relief. He noted to reporters after that it is in Biden’s coronavirus relief proposal but not in the counter proposal from 10 Republicans, and is how US can restore its global leadership.As the White House reaches for a bipartisan bill, Democrats marshaled their slim Senate majority, voting 50-49, to start a lengthy process for approving Biden’s bill with a simple majority.The goal is to have Covid-19 relief approved by March, when extra unemployment assistance and other pandemic aid expires.“President Biden spoke about the need for Congress to respond boldly and quickly,” Schumer said after the lunch meeting, and, referring to the GOP counter offer, he added: “If we did a package that small, we’d be mired in the Covid crisis for years.”Biden framed his views during the virtual lunch meeting with Democrats by talking about the need not to forget working- and middle-class families – even those like nurses and pipe-fitters making $150,000 for a family of four – who are straining during the crisis, according to a person granted anonymity to discuss the private call.The night before, Biden met with 10 Republican senators pitching their $618bn alternative, and let them know it was insufficient to meet the country’s needs. The president made it clear that he will not delay aid in hopes of winning GOP support.While no compromise was reached during the late Monday session, White House talks with Republicans are privately under way.The outcome will test the new president striving to unify the country but confronting a rising Covid-19 death toll and stubbornly high jobless numbers, with political risks for all sides.Vaccine distributions, direct $1,400 payments to households, school reopenings and business aid are all on the line.The Senate Republican leader, Mitch McConnell, criticized the Democrats for pressing ahead on their own. He said he had spoken to Biden ahead of his meeting with the 10 GOP senators.“They’ve chosen a totally partisan path,” McConnell said. “That’s unfortunate.”White House officials have previously cited the US Chamber of Commerce as evidence of broad support for their plan, but the nation’s most prominent business group issued a letter on Tuesday that urged a bipartisan compromise.“There ought to be common ground for a bipartisan proposal that can become law,” Neil Bradley, executive vice-president and chief policy officer, said in an interview.The cornerstone of the GOP plan is $160bn for the healthcare response and vaccine distribution, a “massive expansion” of testing, protective gear and funds for rural hospitals, similar to what Biden has proposed.But from there, the two plans drastically diverge. The vote on Tuesday opens 50 hours of debate on a budget resolution, with amendment votes expected later this week. More

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      Biden more likely to bypass Republicans on Covid stimulus aid after lowball offer

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      Republicans senators made a lowball offer on Sunday to cooperate with the Biden administration on a new coronavirus relief package, increasing the likelihood that the White House will seek to bypass Republicans to fund its proposal.A group of 10 Republican senators led by Susan Collins of Maine pitched Joe Biden a sketch of a relief plan with a reported $600bn total price tag – less than a third of the $1.9tn stimulus package the Biden team has laid out over the last days.The yawning gap between the two numbers caused some observers to question whether Republicans were really trying to reach a deal – or instead were laying the groundwork for future accusations that Biden had not seriously pursued his promises to try to work with Republicans.Asked about the new Republican offer on the NBC News program Meet the Press, national economic council director Brian Deese said Biden is “open to ideas” but would not be stalled.“What he’s uncompromising about is the need to move with speed on a comprehensive approach here,” Deese said.“We have a virus crisis; we have an economic crisis. We have to get shots in people’s arms. We have to get the schools reopened so that parents can go back to work. And we need to provide direct relief to families and businesses across the country who are really struggling here.”One signatory of the Republican offer, senator Rob Portman of Ohio, who has announced his upcoming retirement, told CNN that the $1.9tn price tag was too high “at a time of unprecedented deficits and debts”.But moderate Democratic senator Jon Tester of Montana said the twin crises of the pandemic and record unemployment demanded decisive action. “I don’t think $1.9tn, even though it is a boatload of money, is too much money,” Tester told CNN. “I think now is not the time to starve the economy.”The US has just surpassed 26m confirmed Covid cases and 440,000 deaths. Unemployment insurance claims topped 1m last week and 30 million Americans reported suffering from food scarcity.Hoping for a break with the lockstep partisanship of the Donald Trump years, Biden has made working with Republicans a stated priority of his early presidency.But his advisers have also signaled that speed is important and that they will use a parliamentary measure known as budget reconciliation to fund their Covid relief bill if no Republicans come onboard.With a 50-member majority in the US Senate clinched by the vote of vice-president Kamala Harris, Democrats could advance the relief package alone – if they are able to craft a deal that does not lose centrists such as West Virginia senator Joe Manchin.“This is a unique crisis,” Deese told CNN. “It’s a unique health crisis, a unique economic crisis, and it’s one that calls on all of us to work together with the speed that we need to put a comprehensive response in place.”The Biden plan calls for $1,400 payments to individuals, enhanced unemployment benefits, a $15 minimum wage, support for schools to help them reopen safely, and money for vaccine distribution and administration.Republicans pointed out that Congress has already appropriated $4tn for coronavirus relief in the last year and that some of the $900bn allocated last month has not been spent.Portman said the proposal for $1,400 payouts to individuals in the Biden plan should be restricted based on income. Manchin has echoed that proposal, saying that families earning from $250,000-$300,000 should not necessarily qualify.The importance of keeping Manchin onboard was underscored when the senator reacted negatively to a surprise appearance by Harris on a local West Virginia television station calling for support for more Covid relief legislation. The move was received as an awkward effort to pressure Manchin.“I saw it, I couldn’t believe it,” Manchin said in a local news video. “No one called me. We’re going to try to find a bipartisan pathway forward, but we need to work together. That’s not a way of working together.”In a letter to Biden outlining their offer, the more moderate Republicans quoted his call in his inaugural address for bipartisan unity and said “we welcome the opportunity to work with you.”“We believe that this plan could be approved quickly by Congress with bipartisan support,” the letter said.The Republican proposal mirrored some provisions of the Biden plan, such as $160bn in new spending on vaccines, testing, treatment, and personal protective equipment. The Republicans said they would provide more details on Monday.But Democrats did not appear willing to wait for long to hear the Republican pitch. Senator Bernie Sanders, the incoming chairman of the budget committee, told ABC News’ This Week program: “We have got to act and we have got to act now”. More

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      Why Republicans won’t agree to Biden’s big plans and why he should ignore them | Robert Reich

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      If there were ever a time for bold government, it is now. Covid, joblessness, poverty, raging inequality and our last chance to preserve the planet are together creating an existential inflection point.Fortunately for America and the world, Donald Trump is gone, and Joe Biden has big plans for helping Americans survive Covid and then restructuring the economy, rebuilding the nation’s infrastructure and creating millions of green jobs.But Republicans in Congress don’t want to go along. Why not?Mitch McConnell and others say America can’t afford it. “We just passed a program with over $900bn in it,” groused Senator Mitt Romney, the most liberal of the bunch.Rubbish. We can’t afford not to. Fighting Covid will require far more money. People are hurting.Besides, with the economy in the doldrums it’s no time to worry about the national debt. The best way to reduce the debt as a share of the economy is to get the economy growing again.The real reason Republicans want to block Biden is they fear his plans will workRepairing ageing infrastructure and building a new energy-efficient one will make the economy grow even faster over the long term – further reducing the debt’s share.No one in their right mind should worry that public spending will “crowd out” private investment. If you hadn’t noticed, borrowing is especially cheap right now. Money is sloshing around the world, in search of borrowers.It’s hard to take Republican concerns about debt seriously when just four years ago they had zero qualms about enacting one of the largest tax cuts in history, largely for big corporations and the super-wealthy.If they really don’t want to add to the debt, there’s another alternative. They can support a tax on super-wealthy Americans.The total wealth of America’s 660 billionaires has grown by a staggering $1.1tn since the start of the pandemic, a 40% increase. They alone could finance almost all of Biden’s Covid relief package and still be as rich as they were before the pandemic. So why not a temporary emergency Covid wealth tax?The real reason Republicans want to block Biden is they fear his plans will work.It would be the Republican’s worst nightmare: all the anti-government claptrap they’ve been selling since Ronald Reagan will be revealed as nonsense.Government isn’t the problem and never was. Bad government is the problem, and Americans have just had four years of it. Biden’s success would put into sharp relief Trump and Republicans’ utter failures on Covid, jobs, poverty, inequality and climate change, and everything else.Biden and the Democrats would reap the political rewards in 2022 and beyond. Democrats might even capture the presidency and Congress for a generation. After FDR rescued America, the Republican party went dark for two decades.Trumpian Republicans in Congress have an even more diabolical motive for blocking Biden. They figure if Americans remain in perpetual crises and ever-deepening fear, they’ll lose faith in democracy itself.This would open the way for another strongman demagogue in 2024 – if not Trump, a Trump-impersonator like Ted Cruz, Josh Hawley or Donald Trump Jr.The worst-kept secret in Washington is Biden doesn’t really need RepublicansIf Biden is successful, Americans’ faith in democracy might begin to rebound – marking the end of the nation’s flirtation with fascism. If he helps build a new economy of green jobs with good wages, even Trump’s angry white working-class base might come around.The worst-kept secret in Washington is Biden doesn’t really need Republicans, anyway. With their razor-thin majorities in both houses of Congress, Democrats can enact Biden’s plans without a single Republican vote.The worry is Biden wants to demonstrate “bipartisan cooperation” and may try so hard to get some Republican votes that his plans get diluted to the point where Republicans get what they want: failure.Biden should forget bipartisanship. Mitch McConnell and Senate Republicans didn’t give a hoot about bipartisanship when they and Trump were in power.If Republicans try to stonewall Biden’s Covid relief plan, Biden and the Democrats should go it alone through a maneuver called “reconciliation”, allowing a simple majority to pass budget legislation.If Republicans try to block anything else, Biden should scrap the filibuster – which now requires 60 senators to end debate. The filibuster isn’t in the constitution. It’s anti-democratic, giving a minority of senators the power to block the majority. It was rarely used for most of the nation’s history.The filibuster can be ended by a simple majority vote, meaning Democrats have the power to scrap it. Biden will have to twist the arms of a few recalcitrant Democrats, but that’s what presidential leadership often requires.The multiple crises engulfing America are huge. The window of opportunity for addressing them is small. If ever there was a time for boldness, it is now. More

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      Joe Biden cannot govern from the center – quashing Trumpism demands radical action | Robert Reich

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      I keep hearing that Joe Biden will govern from the “center”. He has no choice, they say, because he will have razor-thin majorities in Congress and the Republican party has moved to the right.Rubbish. I’ve served several Democratic presidents who have needed Republican votes. But the Republicans now in Congress are nothing like those I’ve dealt with. Most of today’s GOP live in a parallel universe. There’s no “center” between the reality-based world and theirs.Last Wednesday, fully 93% of House Republicans voted against impeaching Trump for inciting insurrection, even after his attempted coup threatened their very lives.The week before, immediately following the raid on the Capitol, two-thirds of House Republicans and eight Republican senators refused to certify election results on the basis of Trump’s lies about widespread fraud – lies rejected by 60 federal judges as well as Trump’s own departments of justice and homeland security.Prior to the raid, several Republican members of Congress repeated those lies on television and Twitter and at “Stop the Steal” events – encouraging Trump followers to “fight for America” and start “kicking ass”.This is the culmination of the growing insanity of the GOP over the last four years. Trump has remade the Republican party into a white supremacist cult living within a counter-factual wonderland of lies and conspiracies.More than half of Republican voters – almost 40 million people – believe Trump won the 2020 race; 45% support the storming of the Capitol; 57% say he should be the Republican candidate in 2024.Trump has remade the Republican party into a white supremacist cult living within a counter-factual wonderland of lies and conspiraciesIn this hermetically sealed cosmos, most Republicans believe Black Lives Matter protesters are violent, immigrants are dangerous and the climate crisis doesn’t pose a threat. A growing fringe openly talks of redressing grievances through violence, including QAnon conspiracy theorists, of whom two are newly elected to Congress, who think Democrats are running a global child sex-trafficking operation.How can Biden possibly be a “centrist” in this new political world?There is no middle ground between lies and facts. There is no halfway point between civil discourse and violence. There is no midrange between democracy and fascism.Biden must boldly and unreservedly speak truth, refuse to compromise with violent Trumpism and ceaselessly fight for democracy and inclusion.Speaking truth means responding to the world as it is and denouncing the poisonous deceptions engulfing the right. It means repudiating false equivalences and “both sidesism” that gives equal weight to trumpery and truth. It means protecting and advancing science, standing on the side of logic, calling out deceit and impugning baseless conspiracy theories and those who abet them.Refusing to compromise with violent Trumpism means renouncing the lawlessness of Trump and his enablers and punishing all who looted the public trust. It means convicting Trump of impeachable offenses and ensuring he can never again hold public office – not as a “distraction” from Biden’s agenda but as a central means of re-establishing civility, which must be a cornerstone of that agenda.Strengthening democracy means getting big money out of politics, strengthening voting rights and fighting voter suppression in all its forms.It means boldly advancing the needs of average people over the plutocrats and oligarchs, of the white working class as well as Black and Latino people. It means embracing the ongoing struggle for racial justice and the struggle of blue-collar workers whose fortunes have been declining for decades.The moment calls for public investment on a scale far greater than necessary for Covid relief or “stimulus” – large enough to begin the restructuring of the economy. America needs to create a vast number of new jobs leading to higher wages, reversing racial exclusion as well as the downward trajectory of Americans whose anger and resentment Trump cynically exploited.This would include universal early childhood education, universal access to the internet, world-class schools and public universities accessible to all. Converting to solar and wind energy and making America’s entire stock of housing and commercial buildings carbon neutral. Investing in basic research – the gateway to the technologies of the future as well as national security – along with public health and universal healthcare.It is not a question of affordability. Such an agenda won’t burden future generations. It will reduce the burden on future generations.It is a question of political will. It requires a recognition that there is no longer a “center” but a future based either on lies, violence and authoritarianism or on unyielding truth, unshakeable civility and radical inclusion. And it requires a passionate, uncompromising commitment to the latter. More

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      in Elections

      The $2,000 stimulus cheques alone won't work – the US needs better infrastructure

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      With the Democrats’ stunning sweep of Georgia’s two Senate run-off elections giving them control of both houses of Congress as of 20 January, the idea of $2,000 stimulus cheques for every household is sure to be back on the agenda in the US. But although targeted relief for the unemployed should unquestionably be a priority, it is not clear that $2,000 cheques for all would in fact help to sustain the US economic recovery.One post-pandemic scenario is a vigorous demand-driven recovery as people gorge on restaurant meals and other pleasures they’ve missed for the past year. Many Americans have ample funds to finance a splurge. Personal savings rates soared following the disbursement of $1,200 cheques last spring. Many recipients now expect to save their recent $600 relief payments, either because they have been spared the worst of the recession or because spending opportunities remain locked down.So, when it’s safe to go out again, the spending floodgates will open, supercharging the recovery. The Fed has already promised to “look through” – that is, to disregard – any temporary inflation resulting from this euphoria.But we shouldn’t dismiss the possibility of an alternative scenario in which consumers instead display continued restraint, causing last year’s high savings rates to persist. Prior to the Covid-19 crisis, some two-thirds of US households lacked the savings to replace six weeks of take-home pay. Having reminded Americans of the precariousness of their world, the pandemic is precisely the type of searing experience that induces fundamental changes in behaviour.We know that living through a large economic shock, especially in young adulthood, can have an enduring impact on people’s beliefs, including those about the prevalence of future shocks. Such changes in outlook are consistent with psychological research showing that people rely on “availability heuristics” – intellectual shortcuts based on recalled experience – when assessing the likelihood of an event. For those parents unable to put food on the table during the pandemic, the experience will establish a heuristic that will be hard to forget.Moreover, neurological research shows that economic stress, including from large shocks, increases anabolic steroid hormone levels in the blood, which renders individuals more risk-averse. Neuroscientists have also documented that traumatic stress can cause permanent synaptic changes in the brain that further shape attitudes and behaviour, in this case plausibly in the direction of greater risk aversion.Though the pandemic is in some ways more akin to a natural disaster than an economic shock, natural disasters also can affect saving patterns: savings rates tend to be higher in countries with a greater incidence of earthquakes and hurricanes.This behavioural response is largest in developing countries, where weak construction standards amplify the impact of such disasters. One study of Indonesia, for example, found large increases in both the perceived risk of a future disaster and risk-averse behaviour among people who had recently experienced an earthquake or flood. While the response to natural disasters may be more moderate in advanced economies – where individuals expect that their government will compensate them – some lasting impact will almost certainly remain.The upshot is that we can’t count on a burst of US consumer spending to fuel the recovery once the rollout of Covid-19 vaccines is complete. And if private spending remains subdued, continued support from public spending will be necessary to sustain the recovery.But putting $2,000 cheques in people’s bank accounts won’t solve this problem because unspent money doesn’t stimulate demand. With interest rates already near zero, the availability of additional funding won’t even encourage investment. Sending out $2,000 cheques to everyone thus would be the fiscal equivalent of pushing on a string.Fortunately, there is an alternative: the president-elect Joe Biden’s $2tn infrastructure plan would mean additional jobs and spending, which is what the post-pandemic economy really needs. Better still, under the prevailing low interest rates, this option would stimulate job creation without crowding out private investment.Guardian business email sign-upAlthough Biden’s plan will require more government borrowing, infrastructure spending that has a rate of return of 2% will more than pay for itself when the yield on 10-year US treasury bonds is 1.15%. By raising output, such expenditure reduces rather than increases the burden on future generations. The International Monetary Fund estimates that, under current circumstances, well-targeted infrastructure investment pays for itself in just two years.Obviously, the “well targeted” part is important. President Donald Trump was right that the Coronavirus Aid, Relief, and Economic Security Act was loaded with pork, not least his own “three-martini lunch” tax deduction for businesses. There’s every reason to question whether Congress can do better when crafting an infrastructure bill.In response to this problem, countries such as New Zealand have established independent commissions to design and monitor infrastructure spending initiatives. If Covid-19 changes everything, then maybe it can change the way the US government organises infrastructure spending. Creating an independent infrastructure commission with real powers would go a long way toward reassuring the sceptics and insuring the recovery against the risks posed by the pandemic’s lingering behavioural effects. More