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The spread of coronavirus is disrupting work, travel, and spending in ways that jeopardize the jobs and paychecks of tens of thousands of Americans — and potentially many more.
To blunt the most serious consequences of this deep and persistent economic uncertainty, fiscal stimulus should be on the table. But it shouldn’t be an excuse to waste taxpayer money and explode the deficit.
Government assistance to carry us through the coronavirus scare should be temporary, and it should be targeted at workers and businesses who need it most.
The problem with broad-based fiscal stimulus — like giving everyone a check, as some have proposed — is that it doesn’t address the real issue in the case of coronavirus, which is that supply chains are stalled, goods can’t move, travel is halted, and many people simply can’t go to work.
The government giving everyone more money to spend doesn’t do much good when plants are idle, planes are grounded, and ships are stuck in dock.
The best way to fight the supply problems coronavirus has caused is to restore confidence that the virus is being suppressed and that its health risks are being mitigated. The most impactful money spent by the government will be spent directly on testing, containment, treatment, clear communication, and vaccine development, so people have the confidence to get back to work and live their lives.
But restoring confidence takes time, and that means some workers and businesses, especially in travel-related businesses, will be exposed to lost sales and lost wages, even as they have their own bills to pay. Layoffs and bankruptcies in these sectors have the potential to ripple throughout the economy, turning a temporary slowdown into a full-fledged recession.
Anytime we hear the words “bailout” and “industry relief,” we ought to be wary. When companies believe the government is there to rescue them, it can encourage bad behavior, like excessive risk-taking. No business is “too big to fail.”
But the coronavirus situation is a pretty clear case of an outside shock that has hit travel, hospitality, and other location-dependent businesses uniquely hard, and through no reckless behavior on their account.
Temporary targeted relief to affected workers and businesses to ensure they can continue to pay their bills until coronavirus passes isn’t an invitation for bad behavior or excessive risk-taking.
Policies such as emergency paid sick leave funded through unemployment insurance, deferred tax payments, and expanding low-interest loans to small businesses can help provide the cash individuals and businesses need to meet their obligations. These are the targeted, temporary relief efforts President Trump is trying to put into place.
Ultimately, travel and hospitality companies will have ongoing problems even after coronavirus passes as their customers adopt new ways to work remotely and people reassess their willingness to do things such as vacation abroad and take cruises.
Business disruptions are causing many companies to try alternative work arrangements, connect with customers and colleagues remotely, and reassess where they set up operations.
One unintended consequence of the crisis is that many companies will probably discover more cost-effective ways to get things done that don’t require flying, driving, or even coming to the office.
That’s a problem airlines, hotels, and related industries will need to solve on their own. Fiscal stimulus isn’t a cure-all for the risk coronavirus presents, and it certainly shouldn’t be used as a giveaway for companies and industries that need to adapt to customer preferences.
If government assistance to weather this crisis turns into a never-ending prop for industries that need to change, it will be a waste of taxpayer money.
Yes, big stock market declines have been alarming, but they do not evidence that the U.S. economy is melting down. And while the declines are a sign of deepening concern about where the economy is headed, it’s uncertain how long the disruption will last.
Until that answer becomes clear, targeted relief to individuals and businesses most affected by coronavirus could help prevent a temporary economic slowdown from becoming something worse.