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Peter Morici, an economist and business professor at the University of Maryland, says the issue is debt that the government encouraged people to take on by giving them 'a holiday' on their rent.
“This is the thing that could bring the economy down," Morici told FOX Business.
Signed into law by Gov. Andrew Cuomo in May, the Tenant Safe Harbor Act prohibits courts from evicting residential tenants who experienced financial hardship during the coronavirus.
Nearly two-thirds of New York City residents are renters, and according to the Community Housing Improvement Program, 25 percent of them haven’t paid rent since March. Without that rental income, many landlords simply can’t pay their mortgages and tax bills, Morici said.
“Whenever you talk about suspending rent or suspending mortgages, there's always someone on the other side of that IOU -- someone that's not getting paid,” Morici explained.
More than 700,000 of the city’s workers lost their jobs as a result of the pandemic, according to New York University’s Furman Center. But as the state reopens, four months of debt is looming over their heads and Morici says it won't be limited to rent.
“It's really much bigger," he added. "It's also credit card debt, auto loans, mortgages, and so forth,” he added.
If the crisis is handled correctly, however, “there's no reason why the economy cannot be in three years where it was last year," Morici said. He believes the solution is for the government to bail out American debtors.
“If the federal government can print $3 trillion dollars in stimulus relief, they probably can print $3 trillion dollars more in debt relief,” he said. “If people can't pay, they can't pay. The question is, 'What do we do with these lives?'”