Editorial: The U.S. economy is sliding into a coronavirus hole. Congress needs to do more to pull it out
The intensifying drumbeat of coronavirus-related restrictions and shutdowns has drawn outrage from some conservatives, who argue that the government is driving the U.S. economy into a ditch and, by overreacting, pushing us unnecessarily into recession. Some even contend that this whole virus thing is a plot by liberals to prevent President Trump from being reelected in November.
Either by willful blindness or ignorance, however, they’re ignoring the havoc that the virus itself has already wreaked in China thanks to a slow response at the outset. And they’re turning a blind eye toward the carnage in Italy, where the virus was allowed to get out of hand, overwhelming the country’s healthcare system. That country now is in near-total lockdown, which is what we’re trying to avoid here.
But they’re right about this: Fighting the pandemic is going to take a heavy toll, in both human and economic terms. Although the social-distancing mandates being imposed globally aim to mitigate the long-term damage, they’re going to front-load some of the costs of the outbreak. The demand for services and goods is going to drop, as will consumer spending generally, and the impact will spread quickly from travel and tourism to entertainment to other sectors of the service industry, and to the retail and manufacturing companies that supply them.
The consequences of the outbreak have become clearer by the day, leading policymakers toward increasingly bold responses. Over the weekend the Federal Reserve unloaded much of its arsenal of stimulative monetary policies, slashing its short-term interest-rate target essentially to 0% and pledging to leave it there as long as necessary, among other steps.
Those actions were crucial to preventing the virus from infecting the banking system and drying up credit, sending the economy into the sort of tailspin it experienced in the last recession. But low interest rates won’t help the U.S. healthcare system handle the surge in cases coming from the fast-growing tide of infections. They won’t lead laid-off, quarantined or just plain spooked Americans to continue spending at their usual pace. And they won’t save the small businesses whose customers vanish into their homes.
That’s where Congress has to step in. Lawmakers started off in early March by passing an $8.3-billion emergency spending bill to help deal with the healthcare costs associated with the virus. That was the right first move, and shoring up the healthcare system to beat COVID-19 should remain lawmakers’ first priority.
Yet they also have a responsibility to shore up the economy. The House moved quickly last week to address one piece of the puzzle, approving a bill to fund more coronavirus testing and buttress the federal safety net. Among other things, the bill would temporarily provide family leave and sick pay for workers who don’t already have it, expand unemployment benefits and food aid, and help states with Medicaid costs.
Trump is also pushing to provide aid directly to industries that are hard hit by the virus, notably the airlines and cruise ship companies. We’re not keen on the government picking winners and losers — that’s the market’s job — but there’s a good argument to be made that the airline industry, like the auto industry, is so vital to the rest of the U.S. economy that it cannot be allowed to collapse. Nevertheless, any rescue should come with strings attached to ensure that the companies use the aid to maintain their payrolls and keep workers employed.
One other piece of the puzzle, though, is how to respond to slacking overall demand. Trump is seeking to cut payroll taxes by some $800 billion, a stimulus tactic often employed in downturns. Sen. Mitt Romney (R-Utah) has proposed a simpler and more market-friendly approach: sending every adult American a check for $1,000, to spend as they see fit. Washington has done this before, most recently in 2001 and 2008 under President George W. Bush, so the plan would be easy and inexpensive to administer. And unlike the payroll tax cut favored by Trump, whose benefits would be spread out over several months, the full measure of Romney’s aid would be delivered immediately. The main drawback is that the money would flow to people who aren’t struggling as well as those who are.
The more the virus-related closures stack up, the greater the need for a big response now from Congress. Washington moved too slowly to recognize the threat that the novel coronavirus posed to Americans’ health; it shouldn’t repeat that mistake with the threat it poses to the U.S. economy.
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