The new coronavirus, COVID-19, has shook the entire world. Of course, for now, the top priority for countries around the world is to minimize the spread of the virus, in order to "flatten the curve" and relieve the healthcare system. However, the self-isolation measure which are now in place meant closing, or limiting the activities of many companies. At the moment, the entire global economy is paralyzed. This will of course mean a heavy economic recession, the consequences of which can already be felt. Because of this, every country has begun activities designed to sustain companies, prevent the unemployment rate from soaring and to stimulate the economic activity.
In this entry, we will be analyzing the present state of the American economy, as well as the stimulus package proposed by president Trump's administration. The USA, at the time of writing, has more than 140,000 active cases of the coronavirus, with over 2,400 casualties. Because of this, the USA went into isolation. As in other countries, bars, restaurants, cafés and shopping malls were closed, and the White House further recommended that everyone restrain from all "non-essential" activities.
All this, of course, had disastrous consequences for the economy. Just last week, over 3,3 million employees applied for unemployment benefits. This surge of the unemployment rate on a weekly level, is unprecedented in the United States history. It is almost 5 times worse than the previous weekly unemployment growth record, back in 1982. Many economists are concerned that this is only the beginning of one of the most serious recessions in history. According to some estimates, the number of unemployed in the US could reach over 40 million by mid-April.
President Trump, aware of these consequences, at first insisted that the self-isolation measures be cancelled on the 12th of April, i.e, Easter Weekend. However, after consulting healthcare experts, this was judged to be impossible, and the measures have been extended at least until the end of April. Despite this, hopes that this will be a short crisis remain, as some experts think it will last only as long as the virus persists, after which firms would re-open, and the economy rebound.
Hoping for this best case scenario, the American administration, isn't taking any long-term measures, but is focused more on short term stimuli through financial injections into the economy. Last Friday, the 27th of March, the stimulus package proposed by president Trump was put before Congress for the final time, passing with great difficulties after great disagreements between Democrats and Republicans. At last, and agreement was reached, and the package passed with bipartisan support. It is the largest of its kind in the history of the USA, totaling an amount of 2 trillion US dollars.
So, what do these 2 trillion dollars consist of? The largest single package is the direct financial aid from the government to American households. Anyone with an annual income of less than 75,000$ should expect a 1,200$ check soon. This aid is reduced as income increases, and those with annual incomes of more than 99,000$ won't get it at all. Married couples will receive 2,400$, provided their joint annual income is up to 150,000$. Even children up to 18 years old can expect a 500$ check. It is estimated that 150 million households will receive this sort of aid. Additionally, as part of the package, the government will entirely cover the costs for coronavirus testing, even for those without health insurance.
Airline companies will receive 25 billion USD in aid, and will be offered an additional 25 billion as loans. 17 billion dollars will be given to industries judged to be "critically important for the USA's security". Companies like Boeing fall into this category. Unemployment benefits will also be increased by a total of 250 billion USD, mainly via food stamps and Medicaid health insurance. This is bound to be a logistical nightmare owing to the level of cooperation that will be needed between the federal and state authorities. In order to assist the most heavily hit hospitals, the government will aid them with more than a billion dollars.
More than 400 billion dollars (mostly in loans) are bound for other businesses, and also for cities or states which will be most heavily hit by the virus. These loans will be given under the condition that the firm not fire more than 10% of its employees by the end of September. Furthermore, those companies which receive this aid will be limited in the amount of financial resources they can give to their managers, as well as prohibited from purchasing their own shares. There is also an additional prohibition preventing members of Congress, the President or his Cabinet from taking any of this aid for themselves, their families, or their companies.
New legislation has also been passed in order to control how the the government will be handling the distribution of the stimulus package. President Trump is obligated to appoint a new "Special Inspector General for Pandemic Recovery", who will have to be approved by the Senate. A large part of the disagreements between both parties, before the package motion was passed, were over this position, or, to be more precise, to whom the inspector general would report to: the President, or the Democrat-led Congress. This issue, however, remains unresolved. Congress' activities in distributing the financial aid will also be monitored by a newly appointed five-member committee.
It is interesting to note how the United States, the exemplar of the power of the free market, and its main propagator abroad, immediately falls back to heavy government intervention whenever a crisis arises. The measures presented above were passed despite widespread ideological opposition to government intervention, both in the political parties, and the general public. For now, however, the measures implemented are short term and theoretically sound, though they are bound to increase the national debt, and may even heat up inflation. However, should the crisis continue (which certainly looks probable), these measures will probably have to be supplemented by others.