The coronavirus pandemic is a different category of catastrophe, a public health threat that can only be tamed by banning aspects of human interaction. It’s impossible to keep an economy humming when people temporarily can’t mingle.
Who might save the day? That’s a dangerous question because the easy answer is expensive: The federal government has the power to commit near limitless amounts of taxpayer money to replace every missing paycheck, protect every nervous employer and save every buckling business. To go big, as President Donald Trump said.
There’s panic selling on Wall Street and panic promising in Washington, where Congress is compiling a $1 trillion-plus emergency fiscal stimulus package. How much exactly and to benefit whom?
The Federal Reserve needs to use its powers to keep the financial system operating so the economic disruption of coronavirus doesn’t trigger a banking meltdown.
Federal and state governments also have a role, which includes supporting people who have lost their jobs due to the public health emergency. The economy is headed for a period of steep job losses.
The caution we express is about the secondary coronavirus effect: the rush by politicians to throw money at this crisis in hopes of making all negative and unanticipated consequences go away. It’s business as usual for government to spend other people’s money aggressively. When in doubt, spend. When not in doubt, spend. When in crisis, spend more. That’s the only way to look at the White House plan to fight the virus by, yes, writing checks to most Americans.
But people still working don’t need the cash. It will arrive as a gift. This is profligacy.
Airlines want money to tide them over. The restaurant industry, hotels and casinos, and small businesses wants help, too. The problem with bailouts to specific industry — whether in the form of cash, loans or other assistance — is that selecting winners and losers plays God in the marketplace.
The American economy is fundamentally strong, and its businesses are flexible. Just drive down those seemingly quiet city blocks and you’ll see new signs outside restaurants offering curbside delivery of takeout food.
Most workers, like most companies, will get through this crisis by adapting. This cataclysmic event will have the feel of a long snowstorm. Some businesses will fail. Many people will be out of work. Government should be there to provide appropriate assistance. “Appropriate,” we’d add, isn’t a synonym for “unnecessary” or “unlimited.”