In the past week a potential economic slowdown has escalated to predictions of a recession with one article describing the economy as “all gone to hell.” With many people adopting a social distancing approach and public events being canceled, repercussions have been felt across many industries and activities whereas previously it was hoped that these would be limited to industries directly impacted by the public health contagion. Many employees have been asked to work from home and these employees’ isolation has caused a drop in restaurant business, coffee and alcohol purchases at bars, and transportation cuts. Canceled events from theater, to sports, to graduations, to parades to Disneyland have correlative losses in areas of food travel, lodging, and transportation. The limiting of the effects of the virus to delayed shipments from China has proven to be an optimistic call that did not pan out.
The government has responded with a bill, obtained by negotiations between the Congress and the administration, providing for emergency measures to keep workers solvent but the final agreement has been criticized as a tepid attempt to provide aid which won’t reach the most needy. The agreement is centered on helping workers to get paid sick leave but in actuality it will help only 20% of workers affected and largely leaves the most vulnerable excluded from the aid. It is limited to coverage only for the coronavirus and no other potential future pandemics. The bill does not pertain to large companies with 500 or more employees though these account for 50% of workers; some large companies like Wal-Mart, Target, Gap, and Wawa have implemented voluntary programs to help employees by offering two weeks of paid leave for the virus or for quarantine. The bill also provides exemptions for companies with less than 50 employees which account for an additional 26% of workers. The bill does provide for some assistance for longer leave, under the Family and Medical Leave Act, but this also excludes large companies. In arriving at this agreement, the Trump administration has prioritized corporate profit by denying workers’ benefit and further jeopardized the public health since workers will be reluctant to stay home. Many people do not relate directly to market shifts since they have no stake in the market but the prospect of losing wages and being unable to pay for essential bills looms ominously.
A recession is predicted if the economy contracts for two consecutive quarters. So far economic indicators have not indicated downturns in such areas as unemployment claims but job postings have taken a significant cut in areas such as restaurants, catering, and aviation. There is generally a lag in real changes and the reporting of related data. Steven Mnuchin, the Treasury Secretary, suggests that the market’s ups and downs are not a concern and that no recession will occur since the economy will pick up when the response to the virus stabilizes. He also suggests that some areas of the economy are thriving such as medical supplies, groceries, health aids, and other household items are experiencing a surge in purchases.
Opinion columnists suggest that the Democrats have failed to help the most vulnerable workers and should have stuck to their original proposal providing for seven days of sick leave and a temporary ten days in a public emergency. They suggest that the Democrats folded when they should have proceeded leaving the Republicans to publicly justify blocking this broader program.
Some economists suggest that the economy is headed for big troubles unless the government steps in with quick and comprehensive support for households. Home buying, which was earlier seen as maintaining a strong trajectory in sales has plummeted due to loss of funds in the market and the belief that the prices will go down. In areas highly impacted by the virus, such as Seattle, there are widespread repercussions from workers remaining at home. One owner of a dozen Seattle restaurants has closed his stores for 2-3 months and is laying off almost all of his 800 employees.
Liberal and conservative economists diverge on how the government should respond to the crisis. Jason Furman, formerly chief of economic advisors to President Obama, supports an immediate infusion of cash of one thousand dollars to adults and 500 to minors. This is the most expedient measure to protect spending and stop expanding job losses while allowing households to cover necessities. Helping the broader economy with such a measure would be part of a stimulus and would help states defray costs by expanding Medicaid. More conservative economists suggest that these measures are unnecessary. The Congress is currently poised to provide 1000 dollars to all adults which some Senators are pressing for a two thousand dollar payment now and another 2500 dollars before the end of the year. Glen Hubbard, formerly an economic advisor to President Bush, suggests investing in long term infrastructure projects paid for with cheap government loans, an approach which that has been supported by both parties in the past. Trump has been considering a decreased payroll tax but such measures have been shown to be ineffective in stimulating the economy while lump sum payments have proven to be beneficial. What tepid responses have been made to address the expanding crisis so far have clearly not been sufficient to the most recent movements in the economy and threaten to disproportionately affect the most vulnerable segments of the population.
https://www.house.gov/representatives Provides addresses and contact information for House members so that they can be contacted with concerns regarding the impact of the coronavirus.