There is little doubt that economic data in the weeks to come will obliterate all modern records in their awfulness.
To reach that more optimistic outcome, the US government is trying to build, at great speed, a 3-legged stool. All three components need to come together to make it plausible to return to prosperity reasonably quickly once the coronavirus outbreak is safely contained. One or 2 won’t be enough. When people lose their jobs and remain unemployed for a long period, they are more likely to lose their home to foreclosure, disrupting the rhythms of their lives. They may lose their health care coverage. Their skills and relationships may atrophy in ways that make it harder to go back to work when jobs become plentiful.
Part of the case for generous help for people losing their jobs — like the funding for a major expansion of unemployment insurance benefits, which is included in the bill moving through Congress — is that it can halt that vicious cycle. Think of a neighborhood restaurant that is reduced to a handful of takeout and delivery orders while customers are self-isolating. The restaurant can cut back employee hours, reducing payroll cost. But it still owes rent to its landlord; loan payments to its bank; utility costs; property taxes and more.
“Ideally you want all those small and medium-sized businesses that were solvent and doing a great job as of Feb. 1 to still be around and able to do business when folks can get back to work,” said Heather Boushey, president of the Washington Center for Equitable Growth. This isn’t really about the stock market. The plunge in stock prices is a reflection, rather than a cause, of this perilous moment. But what is happening in many credit markets is more worrying.