Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs.

Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the new norm, many displaced workers don’t satisfy those requirements. Instead, they officially show up as having left the labor force.

From February to April, the labor force shrank by 8 million people. Add that to the more than 17 million increase in unemployment, and 25 million Americans are no longer employed. More than 61 percent of Americans had jobs in February. In April, only 51 percent did, the lowest level since records began in 1948.

In addition, millions of Americans still have jobs but have seen their hours cut. From February to April, the number of people reporting that they work part-time for economic reasons rose by 6.6 million. That spike happened even though part-time workers have lost jobs at a particularly sharp rate. Unemployment among people who usually work part-time rose from 3.7 percent in February to 24.5 percent in April, while unemployment for full-time workers rose from 3.5 percent to 12.9 percent.

Americans from all walks of life are suffering in the great shutdown. But the employment damage is not distributed equally. As often happens in downturns, highly educated workers have fared better than those with less education. Among workers with a college degree, unemployment increased from 1.9 percent in February to 8.4 percent in April. High school graduates with no college education, however, have seen unemployment spike from 3.6 percent to 17.3 percent.

Teenage unemployment is now almost 32 percent, far more than for older workers. Unemployment among Hispanic workers has increased more than for white, black, and Asian workers. Women experienced a larger increase than did men.

We are living through remarkable times. The United States has not experienced unemployment at these levels since the Great Depression. The one bit of good news is that many job losses may be temporary. Indeed, a record 78 percent of unemployed workers report they are on temporary layoff.

Unfortunately, many jobs will be permanently lost. To date, policymakers have rightly focused on economy-wide disaster relief. Keeping families and employers financially afloat is essential for an eventual recovery.

When we start down the path to recovery, policymakers should assess how severe the longer-term damage will be and consider policies that accelerate the return to full employment.

This post originally appeared on the Urban Institute’s Urban Wire blog.

COVID-19 poses a severe threat not only to public health but also to the overall US economy. The nation’s policy response should focus on four basic strategies.

First, we should embrace those economic losses that protect health. The steps needed to combat the coronavirus will inevitably reduce economic activity. We want risky activities to stop. Social distancing is in. Gatherings are out. Reducing economic activity will reduce the overall size of the economy. But we all know Gross Domestic Product is not a measure of social wellbeing. That’s especially true today.

Second, we should help people get through this sudden financial shock. Millions of workers will see their incomes fall from reduced work hours, furloughs, and layoffs. Restaurants, bars, and many other small businesses will see their revenues crater.

Expanding existing safety net programs—as the House-passed Families First Coronavirus Response Act does for unemployment insurance, Medicaid, and food assistance—is a good start. So is supporting paid sick leave. But those programs miss many people.

That’s why we are seeing new proposals to get money out the door quickly. Making direct payments to households—recently proposed by Jason Furman (former economic advisor to President Obama), Greg Mankiw (former advisor to President Bush), and now Senator Mitt Romney (R-UT)—is one approach. Targeting payments to low income households, as Australia is doing, is another. Giving money to employers who keep workers on their payrolls is a third. Whichever approach we take, a priority is getting support out quickly to soften what may be an unprecedented loss in income.

Third, we should protect our economy’s productive capacity so it can rebound once the virus risk recedes. COVID-19 shouldn’t destroy otherwise healthy businesses and nonprofits.

The Federal Reserve will play a role by ensuring smooth functioning of credit markets. Adding liquidity to Treasury markets, as the Fed is doing, is a good step. It may well take more steps in the days ahead. But that won’t be enough.

Congress and President Trump should help fundamentally healthy firms that are facing sudden cash flow stress and lack good financing options. Lending to small businesses is a natural first step. Trump has proposed expanding lending authority by the Small Business Administration. Other nations have announced similarly-focused programs. The United Kingdom, for example, has introduced new business interruption loans.

What to do for larger businesses is a harder question. Many large businesses do have private financing options. Or would if they had managed their balance sheets better. Expect spirited debate about where to draw the line between good and bad bailouts and, for that matter, about what constitutes a bailout. (I’ll have more to say about that in another post.)

Fourth, we should make full use of our economy’s productive capacity once the virus recedes. Rebounding supply will help only if demand keeps up.

The Fed has taken a first step to support demand by cutting its target interest rate to effectively zero and expanding its purchases of Treasury bonds and mortgage-backed securities. Those steps will soften the decline in consumer and business spending.

Whether that will be enough is anyone’s guess. With effective actions now, the economy may rebound quickly once the virus threat abates. Unfortunately, it’s also possible that economic activity will lag. If that happens, fiscal policy can help boost demand. The actions we take now to provide income support will help and could be continued. We also have the usual arsenal of tax (e.g., lowering payroll taxes) and spending (e.g., aid to states) options.

In recent days, America has made great strides in the first strategy, embracing the economic losses necessary to fight the virus. In coming days, the priority will shift to the next two, helping people survive the resulting sudden income loss and defending our productive capacity so it can rebound quickly. Policymakers may also take initial steps to support demand to make full use of that capacity. But the ultimate scope of those efforts will need to track the still-unknown size of the longer-term challenge.

When my sister and I were little, our Dad would challenge us with riddles and word games. I mentioned three in my eulogy for Dad:

1. Imagine a two-volume dictionary sitting on a shelf. Each volume has 500 pages. A bookworm is on the first page of letter A. It wants to eat its way to the end of letter Z as fast as possible. How many pages does it need to eat?

2. Should you walk to work or bring your lunch?

3. Is it warmer in the summer or in England?

Dad used the first to show the perils of leaping to conclusions. The second introduced basic economics. As far as I can tell, the third is just amusing; if you see a deeper meaning, please let me know.

My dad died unexpectedly last Friday. He lived a remarkable, generous life. Obituaries in Bloomberg, NYT, and WSJ give a taste of his success in business, charity, and the arts. He was truly a self-made man.

Some of my favorite memories, however, are of my dad’s rare failures. His unsuccessful effort to hurdle my sister’s cello during a game of chase. That time we got ejected from Yankee Stadium for throwing paper airplanes. The one and only set of tennis I ever won from him.

It’s difficult to believe he’s gone. Dad brought such vigor and energy to life. Indeed, it was only a few months ago that we rocked to Billy Joel at Madison Square Garden. You should have heard him sing “Movin’ Out”. If I make it to my 80s, I’d be thrilled to have half his energy and sharpness.

Health issues brought me to New York City often this past year. They proved a blessing in disguise. My sister Jennifer and I got to see much more of Dad than usual. We hung out in his office, grabbed a few dinners, and celebrated both Dad’s and my birthdays. We feel fortunate we had that time together.

Dad was an inspiration and a great deal of fun. It’s an honor to bear his name.

P.S. See some of his favorite brain teasers here.

Senator Jeanne Shaheen (D-NH) and a score of Democratic cosponsors want to use the tax code to discourage direct-to-consumer advertising by drug companies. Their bill, the End Taxpayer Subsidies for Drug Ads Act, would prohibit firms from taking tax deductions for any consumer advertising of prescription drugs.

Limiting tax deductions is a blunt and arbitrary way of approaching a legitimate concern. Consumer drug ads play an important role in debates about the costs of prescription drugs, the risks of misuse and overuse of some medications, the balance of authority between doctors and patients, the limits of commercial speech, and a host of other issues. For overviews, see here, here, and here.

But the bill is not well crafted to address those issues. The problem starts with the legislation’s name: Allowing drug companies to deduct advertising costs is not a subsidy. Many other deductions are: The charitable deduction in the personal income tax, for example, subsidizes charitable giving. And the mortgage interest deduction subsidizes borrowing to buy a home.

But the business deduction for advertising costs is not a subsidy. The corporate income tax is a tax on corporate income. To calculate income properly, businesses tote up their revenues and deduct their expenses. Those expenses may include wages for workers, rent for office space, and yes, the costs of advertising.

Under an income tax, companies deduct those expenses because they incur them in pursuit of the profits we have chosen to tax. One can debate how rapidly companies in any industry should write-off their advertising costs. But in an income tax, there is no question that they should write them off.

Rhetoric aside, the broader question is whether limiting deductibility is a good way to discourage consumer drug advertising. Using the corporate income tax to impose penalties this way has the same strengths and weaknesses as much more common efforts to offer rewards.

On the plus side, the tax code provides ready infrastructure for creating a financial penalty. With little legislative effort (the bill is less than three pages), lawmakers can design a meaningful deterrent to consumer ads.

But limiting deductibility is a blunt and arbitrary instrument. In principle, lawmakers should discourage ads based on the harms they want to reduce. Congress should impose large deterrents against the most damaging forms of consumer ads, smaller disincentives to less damaging ads, and rewards for beneficial ads (there is evidence some consumer drug ads create benefits).

Ending the tax deduction does not allow such careful calibration. Instead, it creates a single financial penalty based on the corporate tax rate. Recent tax changes illustrate how arbitrary this can be.

When proposals to eliminate tax deductibility for drug ads were floated in 2009, 2015, and 2016, the corporate tax rate was 35 percent. Eliminating the tax deduction would have increased the effective cost of drug ads by more than half. Without deductibility, a $100,000 ad would have cost as much as a $154,000 ad with the deduction.

But the 2017 Tax Cuts and Jobs Act (TCJA) lowered the corporate rate to 21 percent. Now, eliminating tax deductibility would increase ad costs only by about a quarter. A non-deductible $100,000 ad would cost as much as a deductible $127,000 one.

To those not steeped in tax policy, the Shaheen bill has the same rhetorical power as earlier proposals to eliminate tax deductibility for consumer ads. Indeed, it may have even more rhetorical power – a similar billgarnered only four sponsors last year. In practical terms, however, the bill has lost half its economic effect since passage of the TCJA.

For better or worse, advocates for limiting the tax deductibility of drug ads have lowered their ambition. Such are the perils of basing policy on arbitrary parameters of the tax code, rather than focusing on the real costs and benefits of drug advertising.

So what’s a better approach? Well, as much as I enjoy talking tax, regulation should be the first line of attack here. The Food and Drug Administration should weigh the pros and cons of consumer ads and how they vary across different conditions, therapies, and advertising media.

If taxes are the only game in town, lawmakers should do the hard of work of deciding how bad consumer ads are. They do that when they impose taxes on alcohol and tobacco. They do that when they propose taxes on carbon dioxide. And they do that (for goods not bads) when they decide how big tax credits should be for electric cars and research and development. Arbitrary tweaks to the tax code are not the way to go.

Carbon dividends are the hottest idea in climate policy. A diverse mix of progressive and conservative voices are backing the idea of returning carbon tax revenues to households in the form of regular “dividend” payments. So are a range of businesses and environmental groups. Two weeks ago, six House members—three Democrats and three Republicans—introduced carbon dividend legislation.

Here is the idea: A robust carbon tax would cut emissions of carbon dioxide and other gases that are threatening our climate. It also would indirectly increase taxes on consumers and raise significant revenue. Carbon dividends would distribute that revenue back to households through regular payments, thus softening the financial blow of the tax while still reducing emissions. (Of course, the revenue also could be directed to other purposes.)

While the premise is simple, the details of implementing carbon dividends are complex. Policymakers face a range of philosophical, political, and practical issues. In a new report, How to Design Carbon Dividends, my Tax Policy Center colleague Elaine Maag and I explore those issues. Our work was funded by the Climate Leadership Council, an advocate for carbon dividends (full disclosure: I am a senior research fellow with the organization).

Two distinct philosophic views animate carbon dividend proposals. One sees dividends as shared income from a communal property right. Just as Alaskans share in income from the state’s oil resources, so could Americans share in income from use of atmospheric resources.

The second sees dividends as a way to rebate carbon tax revenues back to the consumers who ultimately pay them.

Though these ideas can be complementary, they have different implications for designing carbon dividends. The communal property view, for example, implies people should receive identical dividends that would be taxed as a new source of income. But those who see dividends as a tax rebate would link the payment to a person’s carbon tax burden and make the payment tax-free. Similar differences arise for dividend eligibility, the treatment of children, and other issues.

Elaine and I show how dividends should be designed under each of these views. But we do not recommend either pure approach. Political and practical concerns also matter.

Instead, we suggest a hybrid model that combines the best of both ideas. As a starting point, we suggest US residents with Social Security numbers (a group that could be expanded) would be eligible for dividends that would be paid out quarterly.  Adults would receive equal dividends. Children would receive half as much as adults. Dividends would not be taxed as income, nor would they be treated as income in means-tested benefit programs such as SNAP (food stamps).

Our proposal strikes a balance among the philosophical, political, and practical issues. Paying identical dividends to adults, for example, reflects the communal property view – but halving the benefit for children nods in the direction of a rebate. Paying dividends quarterly reflects both practical and political concerns. They’d be less complicated, less costly to administer, and more visible than smaller, monthly payments.

Unfortunately, the dividend would be somewhat less than the amount of revenue collected by the tax. If life were simple, outgoing dividends would equal incoming carbon tax receipts. But rebating all the revenue would significantly increase budget deficits.

Why? Because it would cost the government money to manage the tax and dividend program. And the government itself would bear some of the cost of the carbon tax. To keep from adding to the deficit, the government must keep enough revenue to cover those costs.

To illustrate, suppose a carbon tax of $43 per metric ton goes into effect in 2021, as the Climate Leadership Council has proposed. Gross revenues would be about $200 billion. It would cost the government about $6 billion to operate the dividend program and cuts in other revenues and higher spending would total more than $40 billion. Thus, to avoid deficit increases, the dividend pool would be about $150 billion.

Even with these offsets, we estimate that eligible adults would receive an annual dividend of $570 in 2021 while a family of two adults and two children would get $1,710.

Different design choices could raise or lower these amounts. Collecting income tax on dividends, for example, would allow larger dividends. But the after-tax dividend would be the same, on average, with more going to people in lower income tax brackets and less to those in higher ones. Different treatment of children also would change dividends. Giving children full dividends, for example, would reduce dividends for adults, but increase them for families with children. Dividend amounts could also vary depending on eligibility, participation rates, the size of the carbon tax, and other factors.

In short, details matter in designing carbon dividends. We hope our paper provides a useful guide to those details and the choices and tradeoffs that carbon dividends pose.

Record stock buybacks—driven in part by the corporate tax changes in the Tax Cuts and Jobs Act (TCJA)—have sparked a media and political furor. Unfortunately, they’ve also created a great deal of confusion. To help elevate the debate, here are three things you should know.

1. Repatriated overseas profits are the main way TCJA is boosting buybacks

By slashing corporate taxes, TCJA will boost after-tax profits and cash flow. Companies will use some of that cash to buy back shares. But that is not the main way TCJA is fueling today’s record buybacks.

The big reason is the “liberation” of around $3 trillion in overseas profits. Our old system taxed the earnings of foreign affiliates only when the domestic parent company made use of them. To avoid that tax, many companies left those earnings in their affiliates. They could reinvest them in their foreign operations or hold them in U.S. financial institutions and securities, but they couldn’t use them for dividends to parent company shareholders or stock buybacks.

By imposing a one-time tax on those accumulated profits, the TCJA freed companies to use the money wherever they wanted, including in the United States. And multinational firms are leaping at the chance. Cisco, for example, says they are repatriating $67 billion and buying back more than $25 billion in stock.

Cisco’s response reflects a broader trend. Repatriated profits will account for two-thirds of this year’s increase in stock buybacks, according to JP Morgan. Stronger earnings, due to both improved before-tax profits and lower taxes, make up only one-third.

2. Buybacks do not mechanically increase stock prices

Buybacks can help shareholders. But it’s not as simple as much commentary suggests.

The common story is that buybacks boost stock prices by reducing the number of shares outstanding. That sounds like basic economics: Reduce supply, increase price. But buybacks have a second effect that pushes the other way.

When companies pay out cash, their value falls. This effect is easy to see when companies pay dividends. On the morning after a dividend, a company’s stock price usually drops. One day the stock price reflects the company’ s operating value plus the cash it will use for the dividend. The next day it’s just the operating value.

That also happens when a company buys back stock. It spends its cash, so the value of each share declines. But this decline isn’t conspicuous. It doesn’t happen on an announced day (as with a dividend payment), and it happens at the same time the supply effect is pushing the other way. So commentators tend to overlook the stock price hit from cash going out the door.

How do the two effects net out? It depends. For starters, suppose we live in a frictionless (and mythical) world. There are no taxes, everybody is well informed, executives are perfect agents of shareholders, and it’s costless to raise new capital. In that world, the two effects exactly offset. The decline in the stock price from paying out cash matches the increase in the stock price from having fewer shares outstanding. And the stock price does not change.

In this world, a dollar on the company’s balance sheet has the same value for investors—one dollar—as a dollar on the investors’ own balance sheets. Stock buybacks simply move some dollars from the company to its investors. But they don’t create or destroy any value.

Of course, the real world isn’t frictionless. Taxes matter, as do imperfect information, misaligned incentives, and the cost of raising capital. The question is how do they matter. Is a dollar on a company’s balance sheet worth more than an investor’s dollar? Less? The same?

It depends. Suppose a company has many promising investment opportunities. If raising capital is expensive, a dollar inside the company may be worth more than a dollar outside. Investors value the ability to pursue good opportunities without the burden of raising new capital. In this case, a (misguided) stock buyback would drive the value of the stock down, not up.

Another company might have few promising investment opportunities. Shareholders might worry executives will squander extra cash, perhaps through empire building, executive perks, or just taking their eye off the ball. Investors might therefore treat a dollar of cash inside this company as worth less than a dollar, perhaps 90 cents or even as little as 40 cents. In these cases, stock buybacks would drive the value of the stock up.

On average, stock buybacks are more common in the second scenario than the first. So buybacks do tend to lift stock prices. Not because of the mechanical link between supply and price, but because shareholders value a dollar on their own balance sheets more than a dollar inside the companies buying back stock.

3. Today’s buyback furor reflects a much larger debate about shareholder capitalism.

Concern about buybacks didn’t start with the TCJA. Some commentators have long worried that shareholders can be shortsighted. They may focus too much on next quarter and too little on next decade. If so (there is much debate), shareholders may undervalue cash inside companies. Buybacks may thus be too large, hurting shareholders themselves and the broader economy.

Others object to shareholder capitalism more fundamentally. Comparing the value of dollars inside and outside a company presumes those dollars belong to shareholders. Our system largely works that way today. But what if workers and other stakeholders also have a claim? If so (again there is much debate), buybacks may allow shareholders to capture all the value from what should be shared resources. This concern animates Senator Cory Booker’s recent proposal to limit stock buybacks.

Evaluating these concerns is a job for another day. For now, remember that the stock buyback debate boils down to three basic questions. When do investors think money inside a company is less valuable than outside? How well do investors make that judgment? Should investors be the only ones with a claim on a company’s money? Debate over those questions will continue long after today’s focus on the TCJA.

This post originally appeared on TaxVox, the blog of the Tax Policy Center.

For your weekend listening pleasure (?): I visit the ReConsider podcast to chat money, inflation, fiat currencies, gold, Bitcoin, & Uncle Sam’s balance sheet. Starts at 4:59.

https://app.stitcher.com/splayer/f/123218/53701811