As terrifying as the spread of the coronavirus is, the speed with which it has shut down the U.S. economy has been even more shocking. Entire industries shuttered and almost every place where people gather closed in a matter of weeks.
Medical and economic recovery hinges on a terrible conundrum: The very measures needed to stop the spread of disease also inflict immediate and massive damage to the economy, along with the livelihoods of millions.
Accepting this, cooperating with even painful measures is vital. So too is the response of the federal government, which must take unprecedented action in this growing crisis. For all the differences this Editorial Board has had with President Donald Trump, his instinct to go big and fast is the right one and Congress should heed it.
And yet, some responses make more sense than others. Neel Kashkari, president of the Federal Reserve Bank in Minneapolis, told an editorial writer that the economic response should be guided by a few key principles:
1. Help otherwise sustainable businesses stay afloat and keep workers on the payroll.
2. Speed and scale are of the essence. “People need help right now,” Kashkari said. To limit damage and hasten recovery, the government must act quickly.
3. Help individuals do their part to limit contagion. That means sick leave, unemployment coverage and cash assistance to help them keep their houses and pay bills even if they must stay home.
4. Stay flexible. Waves of assistance may be needed, Kashkari said, possibly until a vaccine is discovered. “No one knows yet whether lifting quarantines months from now would result in another outbreak,” he said.
Will this be costly? Yes. In fact, Kashkari said the $1 trillion package Trump is calling for may only be a first installment. But it’s an infusion that could help the country bounce back with minimal damage.
Thankfully, Trump’s initial proposal of a payroll tax holiday has faded. As Kashkari and others have noted, it would help only those with payroll jobs. That leaves out too many Americans. Trump had proposed using $500 billion to send checks to Americans in two installments — a move that could quickly add some certainty to an unstable situation.
A GOP bill emerging in the Senate Thursday also calls for direct payments, along with loans to large corporations and small businesses and corporate tax cuts that aren’t likely to win votes from Democrats. We’ll reserve judgment until a final bill takes shape.
Any bailouts to business should ensure that money is used to retain workers. Otherwise, unemployment insurance could be quickly overwhelmed. In Minnesota, which rightly relaxed requirements for unemployment, calls from recently laid off workers have flooded in at the rate of 2,000 per hour.
Economist Art Rolnick, a senior fellow at the Humphrey School of Public Affairs and a former vice president at the Federal Reserve in Minneapolis, said that federal resources should be focused on sustaining vital industries, such as airlines. Hotels, casinos, cruise ships? Not so much.
“That the market can sort out,” Rolnick said. “When demand returns, so will they.” In a pandemic, he said, “I worry about people. Resources should go to vulnerable individuals.” People need access to health care and help keeping their lives going in what he said hopefully could be a short — albeit sharp — recession. If that’s done, Rolnick said, when the pandemic recedes the pent-up demand Trump envisions could emerge.
Congress passed an initial $750 billion package. The proposed $1 trillion plan, depending on the details, would stabilize markets, provide a lifeline to Americans and prevent a deeper recession. Delay, right now, equals damage.