As much as the nation’s elected leaders from the White House to statehouses have found themselves at the vanguard of health care policy in recent days, taking dramatic actions to close schools, churches and businesses to lessen the severity of the coronavirus outbreak, the day is swiftly coming for equally decisive action to protect the nation’s economy from the worst of a looming recession.
Indeed, it’s not entirely clear whether “looming” is the correct word, given the widespread slowdown in spending and 28% decline in the Dow Jones from mid-February to mid-March. For many, COVID-19 means working for home, but for others it may mean not working at all. In all likelihood, the recession is here already.
The Federal Reserve appears to have recognized this, cutting benchmark interest rates to near-zero and pumping money into the economy, but there are limits to what can be done given how rates were already low. That puts the burden on President Donald Trump to negotiate an economic stimulus package with Congress based on his $1 trillion proposal, which is larger than the aid package approved when Barack Obama was president at the depths of the Great Recession.
Direct cash payments to Americans of $1,000 or more, small-business loans and a $50 billion-plus bailout for the airline industry are in the mix. There isn’t much support among House Democrats, however, for throwing money at wealthy airline shareholders who have made billions of dollars over the last decade.
Direct cash payments are another matter, as the idea originated in Congress and boasts bipartisan support, including that of a high-profile Republican, Sen. Mitt Romney of Utah. As Treasury Secretary Steve Mnuchin observed Tuesday, recipients would have to be income eligible, so no checks for millionaires. The alternative? Perhaps an unemployment rate of 20%, according to Mnuchin.
Not to put too fine a point on it but the United States would be far better positioned for a global recession if Washington had put its budgetary house in order when the opportunity presented itself. Budget deficits have risen precipitously under President Trump, in large measure because of a tax cut that favored the wealthy and was not offset by spending reductions.
Going another trillion dollars or more in the red would seem less burdensome if the nation weren’t already running a $1.02 trillion deficit. That the “sugar high” stock market gains of the Trump years have already been wiped out in the downturn offers some lessons that academics can explore when we are on the other side of the economic collapse.
If elected officials at all levels of government appear a little flat-footed at the moment, can anyone really blame them? We’re mostly thankful that the president is no longer in denial over COVID-19. One imagines he’ll be much faster in pulling the trigger on anything that would put some wind in the economy’s sails, especially sending checks to potential voters. When that happens, state and local leaders should be ready to jump on board with more help for those of us who will be struggling and more opportunities for business growth. Rough waters are ahead.
