Beware simple solutions to complex health and economic crisis
The draconian measures being taken to slow the spread of COVID-19 — the shuttering of much of the food and entertainment industry, the closing of borders, the resulting near stoppage of air travel — will do tremendous damage to the U.S. and world economies. Wall Street clearly recognizes this, with stocks on Wednesday continuing their unprecedently steep decline, dragging the retirement savings of millions of Americans down with them.
A sharp and severe recession is now inevitable. The challenge will be to mitigate the damage and quicken the recovery. The bright spot is that the pre-pandemic economy was fundamentally strong. The bad news is the world still does not know how bad the health crisis will be or how long it will last. And it is a crisis that has revealed weaknesses behind that strong economy, including inadequate savings and excessive corporate debt.
Sometimes the simplest solutions are the best, but not when the challenge is as complex and multifaceted as this one. That is why we are leery of the idea first hatched by Sen. Mitt Romney, R-Utah, then endorsed by the Trump administration, to cut a check of $1,000 for every American. On Wednesday Connecticut Sen. Chris Murphy doubled down, and then some, calling for “a $2,000 check to every adult and child” to “continue quarterly” while the pandemic continues.
This is an election year and the checks would be popular, but they will arrive for people who weathered the storm well, or maybe even prospered if they work at Amazon, and limit the resources available for people and businesses severely damaged.
And while interest rates are low, the nation’s record $23.5 trillion debt should not be entirely ignored.
While time is critical, and assuring that the relief flows down to workers and small businesses is crucial, a more targeted and strategic approach is called for. Relief should be income based, targeted to workers in particularly hard-hit industries, and assure that resources are also available for businesses. Workers need jobs to return to.
We endorse the calls to increase food assistance funding and to remove the work requirements for such aid recently instituted by the Trump White House. Federal dollars must be in place to support post-pandemic recovery plans at the state and local level.
The billions that will be sought to rescue large corporations hit hardest by the crisis must come in the form of loans, not taxpayer giveaways. And they must come with provisions that the assistance be used to boost employment and productivity, not spent on stock buybacks to enrich executives and other major shareholders.
In a conversation Wednesday, Connecticut Department of Economic and Community Development Commissioner David Lehman made a couple of important points. First, there is no playbook for handling a dual health and economic crisis like this one. It is unprecedented. Secondly, while the state can play an important role in minimizing the economic damage and helping spur a subsequent recovery, it is highly dependent on the fiscal resources that only the federal government can muster.
So far, Lehman and Gov. Ned Lamont are pulling the right levers. The state is surveying businesses to get information on the resources they need to weather the pandemic and assist in the recovery.
Disaster relief funding is being made available through the U.S. Small Business Administration, via a state request.
The state Department of Banking is working with private lenders to both suspend repayment obligations and to ease credit terms for new loans when individuals and small businesses with sound banking histories move from the survival to the recovery phase.
The DECD has deferred repayments for about 800 businesses that received state-backed business express loans. It should consider loan forgiveness to aid recovery.
Suggestions from the conservative Yankee Institute think tank deserve consideration as well, including not increasing the state unemployment insurance tax businesses normally face after layoffs, and boosting the Earned Income Tax Credit for working families.
Delaying for a year the minimum wage increase — from $11 to $12 — now planned for September (a step toward the $15 wage) might make sense to help small businesses, particularly restaurants, get back on their feet.
This is a difficult and frightening time, and more struggles lie ahead. They are not insurmountable. Setting politics as usual aside for the collective good would help.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Editorial Page Editor Paul Choiniere, Managing Editor Tim Cotter, Staff Writer Julia Bergman and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.
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