Edelman Financial Engines Founder Ric Edelman breaks down the details of Sen. McConnell's $1 trillion coronavirus relief proposal with Yahoo Finance's Zack Guzman.

Video Transcript

ZACH GUZMAN: Meantime, we got an update yesterday in terms of how Washington is planning to respond to the economic slowdown, caused by the spreading of coronavirus cases now here in the US. A key piece of that plan in the $1 trillion plan proposed by Senate Majority Leader Mitch McConnell includes a plan to send, right now, $1,200 checks to the American public for those making less than $75,000 in tax year 2018. Treasury Secretary Steven Mnuchin says that that does not go far enough, so we will maintain our watch on this and see if things change.

But I want to bring in a man who knows very well what that could mean for the overall economy. That's Ric Edelman. He is the Edelman Financial Engines founder and he joins us now via Google Hangout. And Ric, we've talked a lot about some of the concerns here in terms of policies that might get instituted and what they could do to various underlying things. We saw it back in the 2008 financial crisis, a lot of fears of what it could do to inflation. Not a lot of those fears came to fruition. But right now as you're seeing these things debated, what's your take on how the economy right now could potentially respond to some of these levers that Washington, DC is negotiating.

RIC EDELMAN: Well, the economy will ultimately respond well as we work our way through this crisis. And that is why the government has to do everything it possibly can and very, very quickly. I agree with the Secretary of the Treasury that 1,200 bucks is not sufficient. It's a good start, but it's not nearly going to be enough. This is going to last a lot longer than most people fully appreciate. And we recognize that the average American household has an income of $4,000 a month. A $1,200 check isn't going to go very far. Now we certainly have a lot of reduction of spending. So I don't know that everybody needs four grand a month from the government, but a one-time check of 1,200 bucks isn't going to cut it either.

So the government is going to recognize this. They're going to do more than they're already doing, which is already a lot, backing up money market accounts, providing support to the muni-marketplace, buying back a lot of treasuries and mortgage backed securities, creating greater liquidity in the marketplace, reducing interest rates to zero. All these are great. They're going to do much, much more than that as we discover tens of millions of Americans unemployed or furloughed over the weeks and months to come.

ZACH GUZMAN: Yeah, and on that front, we got the update from Bank of America saying that we could see the initial jobless claims number next week spike to 3 million. Keep in mind the worst weekly update we got back in 2008 did not even top 700,000, when we look at unemployment claims. So what's your take on that number and how it kind of speaks to how quickly things are falling out here as more and more employers look at their balance sheet and say, we just got to let people go?

RIC EDELMAN: Yeah, we're only seeing the very beginning of this. There's no question that it's going to be coming. Here's the good news. We all do see it coming and we all know why, which means as soon as medical science does come up with the treatments and the vaccines, which are projected in the next 12 to 18 months, we're going to get ourselves through this. All we've got to do is get through it, tied ourselves over. So the notion that, oh my goodness, might this create inflation, might this increase the federal debt, who cares? Let's just remember what Butch Cassidy said to the Sundance Kid. You can't swim, the fall is going to kill you. So let's worry about today, today, and not worry about longer term economic impacts. We'll deal with those issues later.

ZACH GUZMAN: I think that's probably a smart way to look at this too. And we're thinking about all the other Fed governors watching this. The former Fed governors that we've spoken to saying, just get the liquidity out there. Get your stop gaps in there to help this in the short term. Worry about things later. We've heard that from them.

When we look at other things here though, in terms of the response measures, it is kind of interesting to consider that the president is floating the idea-- he spoke in the press conference we saw it today, that he would be blocking all share buybacks. He's strongly opposed to those coming through if you are getting bailout money, and also taking equity positions in some of the companies that would be taking bailout money. What's your take on that and how it changes the landscape, versus what we saw back in 2008?

RIC EDELMAN: Yeah, I think it's really an extension of the prohibition of profiteering. You know we don't want grocers to start dramatically increasing the prices of very needed products in the community. And by the same notion, if the government's going to be providing money to banks for them to distribute to the American public through loans or what have you, we certainly don't want to see them internalizing this for their own stock values or their own personal bonuses. So clearly that makes sense in the short run. If you're going to take government money, then let's do it for the right reason and that's to preserve jobs as best as we can and to help Americans get through this as effectively as we possibly can. So the president's comments I think are perfectly understandable.

ZACH GUZMAN: Real quick, before I let you go, I know I put you in a tough spot once before when I asked you about a bottom in the crypto market. I think you said, don't ever do that to me again. But you know what, it's Friday. Rick, where are we from a bottom from here as you're watching all this play out? Too early to call?

RIC EDELMAN: It is too early to call. It's going to get worse before it gets better. But this is not important if you're a long term investor with a diversified portfolio. It's not important if you have a long term time horizon. And you could argue that this is a buying opportunity. Dollar cost averaging your way in to the market with new cash is not a bad idea, but do recognize it's going to get uglier before it's prettier. And we need to just reconcile that fact, so that we aren't shocked by the news that is yet to come.

ZACH GUZMAN: All right, Edelman Financial Engines founder Rick Edelman. Thank you so much for joining us. I appreciate it.