Economic Experts Caution Against Overreaction, Call for Targeted Support To Lessen Coronavirus' Impact
Multiple economic experts have cautioned Washington against overreacting in its attempts to lessen the impact of the coronavirus on the U.S. economy.
Over the weekend, the House of Representatives passed the Families First Coronavirus Response Act with broad, bi-partisan support in a final vote tally of 363-40.
The bill calls for free nationwide testing for the coronavirus, paid family sick leave, emergency food assistance, and enhanced unemployment benefits.
Trump supports the legislation, tweeting: “Good teamwork between Republicans & Democrats as the House passes the big CoronaVirus Relief Bill. People really pulled together. Nice to see!”
Good teamwork between Republicans & Democrats as the House passes the big CoronaVirus Relief Bill. People really pulled together. Nice to see!
— Donald J. Trump (@realDonaldTrump) March 14, 2020
The bill will go to the Senate where it is expected to pass early in the week.
Treasury Secretary Steven Mnuchin — who negotiated the deal with House Speaker Nancy Pelosi, in consultation with Senate Majority Leader Mitch McConnell — said at a news briefing Saturday that the federal government is still in the “second inning” of its response to the coronavirus, indicating economic stimulus measures may follow including cutting the payroll tax.
“We have a lot more we need to do with Congress,” Mnuchin said. “The speaker and I have acknowledged it.”
However, Paul Winfree — an economic expert at the Heritage Foundation and former director of budget policy in the Trump White House — opposed a broad-based stimulus move such as cutting the payroll tax, which funds the Social Security program.
“Any policy response should be targeted and temporary — and tied to addressing the underlying crisis of the viral attack and the actual problems American families may face as a result,” he said in a statement to The Western Journal.
“A payroll tax cut is the type of tool that might address a recession, so it’s probably not the best tool to use to combat a pandemic,” Winfree added. “Moreover, a payroll tax cut does not assist those who help to minimize the public health risk by staying at home rather than reporting to work during the epidemic.”
The Cato Institute’s Ryan Bourne agreed, arguing “there’s no case for a big payroll tax cut through November’s election, as President Trump seems to want.”
“The key challenge is how to ease liquidity constraints binding on households and businesses which would suffer the biggest losses of income if demand for their services collapses or their activities were required to be temporarily paused,” the economist explained.
Bourne advocated “for targeted measures that help otherwise viable businesses from going under or provide a degree of security for workers or contractors who would otherwise have perverse incentives to continue working even if sick.”
American Enterprise Institute’s Desmond Lachman — who served as deputy director in the International Monetary Fund’s Policy Development and Review Department — told The Western Journal he is fully supportive of federally funded paid sick leave.
“The idea (is) that you need paid sick leave right now,” he said. “You need that in order to contain the spread of this coronavirus. What you don’t want is you don’t want people going into work sick, and they’re going into work sick because they can’t afford to lose their pay.”
However, Lachman disagrees with both Winfree and Bourne regarding cutting the payroll tax.
“The best side of support that can come from the budget side is if you can get the money into the economy very quickly,” he contended.
Hadley Heath Manning, policy director for the Independent Women’s Forum, hopes Congress does not open the federal coffers too far in its desire to “do something.”
“[L]awmakers shouldn’t blindly throw money and mandates at the problems they see without thinking strategically about the secondary or tertiary effects of their actions,” Manning said in a statement to The Western Journal. “Relief should be targeted to those who need it most.”
“My greatest hope is that we will all, as individuals, rise to the occasion by reaching out in our neighborhoods to help one another,” she added. “This type of local, voluntary, private response will ultimately be more effective and more powerful than any government program.”
Lachman encouraged Trump to also keep the world economy in mind as he fashions the U.S. economic response.
“The United States is part of the global economy,” the financial expert said. “So if things go really wrong abroad that’s going to affect us as well. So the best case is everybody is doing the right sort of thing, and the United States is providing leadership for a coordinated approach to what’s a global problem.”
At least some world leaders appeared to agree.
Following my call with @realDonaldTrump and all G7 leaders, we agreed to organize an extraordinary Leaders Summit by videoconference on Monday on Covid-19. We will coordinate research efforts on a vaccine and treatments, and work on an economic and financial response.
— Emmanuel Macron (@EmmanuelMacron) March 13, 2020
Trump and all G7 country leaders plan to participate in a video conference on Monday to “coordinate research efforts on a vaccine and treatments, and work on an economic and financial response.”
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