Swift, comprehensive action from Congress is necessary to help the U.S. economy weather the storm caused by the coronavirus outbreak.
Businesses have shut down, leaving millions out of work — hopefully temporarily. Spending has slowed, and the stock market has seen a precipitous decline that reflects the uneasy uncertainty of investors. Unlike with most recessions, the economy has run into a wall rather than slowly having the brakes applied.
Lawmakers last week took a necessary first step, approving legislation that provides for free testing for COVID-19 (free meaning taxpayers will bear the cost) and provides paid emergency sick leave for some workers. Several other steps will be required to guide the nation through an unprecedented journey, with the Senate spending the weekend and Monday debating a relief package expected to cost $2 trillion. Treasury Secretary Steve Mnuchin has said that without decisive action, unemployment would reach 20 percent, which probably is an underestimate.
The situation is a rare one in which Congress should act first and ask questions later about how to pay for it all. And it points out the legislative malpractice that has been common in recent years.
The United States would be much better prepared for handling this crisis and better positioned for emergency spending if leaders had acted responsibly throughout the Trump presidency. Instead, the nation already was headed for a $1 trillion deficit this year, despite what had been a robust economy.
Tax cuts passed when Republicans had control of Congress in 2017 were followed by an increase in spending to create an untenable fiscal situation. Adding to the national debt now would not seem so burdensome if that debt were not already $23 trillion, leaving the United States ill-prepared for managing an economic calamity.
The booming stock market gains of the Trump years already have been wiped out, highlighting the fiscal irresponsibility that contributed to those gains. Deficit spending should be reserved for times of need; when the economy is strong, the debt should be paid down rather than allowed to reach a point where the federal government pays nearly $500 billion in interest each year. That’s about $1,500 from every American in interest alone.
Our complex economic system is designed to generate steady growth and mitigate drastic changes. Two of the tools for that are tax cuts and lowered interest rates to pump money into the economy when necessary to ward off a recession. With the Trump administration already employing both tactics, government has limited tools at its disposal. The Federal Reserve recently lowered interest rates to zero percent.
The details of all this will be a subject for economists and scholars to explore in the future, when the crisis has passed. For now, the focus is on limiting the economic damage while also taking steps to mitigate COVID-19.
Mnuchin has outlined a plan to provide taxpayers with checks for $1,200 as soon as possible. The idea is to pump money into the economy and to provide a stopgap for those suddenly out of work. A second infusion of cash a month later also has been proposed, and the deadline for paying 2019 income taxes has been extended.
The key to tossing out checks left and right will be to ensure they don’t land on people who don’t need them. The same goes for industries that have seen a swift downturn after years of record profits and corporate tax cuts.
To address a crisis that is changing every day, Congress must act quickly and responsibly.