Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday March 11, 2020
Economic Prescription for Coronavirus: ‘You’ve Got to Go Fast’
The government can’t prevent the coronavirus from damaging the U.S. Economy.
The usual tools that economic policymakers rely on, like tax cuts and stimulus spending, won’t restore canceled conferences, unclog supply chains or persuade wary consumers to go out to bars and restaurants. Even if such policies would help, they conflict with the advice of health officials who are urging “social distancing” to slow the spread of the virus.
But that doesn’t mean policymakers are powerless. Economists say well-designed programs could limit the damage and help ensure a quick rebound.
President Trump said Monday that he would meet with congressional leaders to discuss a “very substantial” payroll tax cut and other measures. Many economists are skeptical of that approach, arguing that a payroll tax cut would be too small and too poorly targeted to be of much help.
Instead, they recommended a variety of other steps, some narrowly aimed at addressing the outbreak and some intended to bolster the broader economy. One lesson from the last recession is that the government has to move quickly.
“You’ve got to go big, and you’ve got to go fast,” said Claudia Sahm, a former Federal Reserve staff member who is now director of macroeconomic policy at the Washington Center for Equitable Growth, a left-leaning research organization. “If you don’t go fast, you’re not going to short-circuit it.”
Here are some forms that such intervention could take: 1) Fight the disease. 2) Cushion the blow. 3) Stimulate the broader economy. 4) What about payroll taxes? (Continued: NYTimes)