The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act was a “very good start,” but more U.S. stimulus initiatives are still urgently needed, according to Ernesto Ramos, head of equities at BMO Global Asset Management.
The additional funds that have been proposed by Congress and the Trump administration for the Paycheck Protection Program would certainly “help people get through the next few months,” Ramos told ThinkAdvisor. (On Thursday, Democrats blocked an attempt by Senate Majority Leader Mitch McConnell to add $250 billion to the Paycheck Protection Program, saying the small-business loan offering needed “fixes.”)
Meanwhile, “Trump’s push for a $2 trillion infrastructure bill is a very good idea because it creates a sustainable increase in aggregate demand” and also stands to provide a “multiplier effect” for the economy, said Ramos, who leads the portfolio management and research teams for all equity strategies at BMO Global Asset Management in the U.S.
Another $1 trillion to $2 trillion in total fiscal stimulus is needed “to make up for this gap” we now have in our $20 trillion economy amid the countrywide shutdowns that “I only assume [are] going to last for about four months,” he said. Just how much is needed is going to be based on how long it takes for the crisis to be substantially resolved, he noted.
In the meantime, the U.S. needs to build more facilities and manufacture more medical equipment to overcome the crisis — and “let’s maybe fix our roads while we’re at it,” he said. The infrastructure money could also help “keep people employed with a paycheck and with health coverage” because if the government awards contracts to build facilities in the U.S., “those companies will take that money and hire people,” he noted.
Right now, the unemployment benefits that were included in the CARES Act are going to help many Americans get through the next few months, he said. However, he added: “I think the next step is to do a real government intervention” to boost the infrastructure and stimulate job creation.
Citing vast nationwide outlays for the war effort during World War II, he suggested that “we are at war with a disease, so let’s just create our own version of a munitions factory” — but instead of weapons, build more hospital beds, ventilators and other equipment.
Then, when the coronavirus threat is under control, “let’s figure out how to fix our bridges and roads and so on that are in dire need of repair … until this economy has enough of its steam” back to sustain itself, he said.
The Federal Reserve, meanwhile, can do more also, he said. “We have seen a massive amount of monetary easing — the likes of which we have never seen,” he noted.