[PJ Media] China’s stock market is the world’s best performer, thanks in part to massive fiscal stimulus in response to last year’s trade war and this year’s virus epidemic. That’s what governments are supposed to do in response to natural disasters, and the rest of the world should do the same thing.
p
...With US and many other government bond yields at record lows, government budgets have nearly unlimited capacity to expand in response to the short-term economic shock caused by quarantines, travel restrictions, and business closings. Emergency response has nothing to do with Keynesian fiscal stimulus. Natural disasters delay economic activity but do not change the economy’s long-term growth potential, unless they kill very large numbers of people. That manifestly is true of Covid-19, which has a low fatality rate. The economic impact of the virus stems from preventative measures, which temporarily suspend economic activity. Governments should step in and provide a fiscal bridge. This is no different than storm or flood damage.
...To be effective, emergency measures must be big, dramatic, and immediate. Emergency tax reductions, including a temporary suspension of social insurance payments by individuals and businesses, are the ideal measure. Forty-four percent of Americans pay no income tax, but Social Security contributions comprise 12.4% of income, split between workers and employers. The US Congress should authorize emergency borrowing authority to make up the difference in the Social Security Fund.
The Export-Import Bank, the Small Business Administration and other government entities should authorize emergency zero-interest loans for businesses especially affected by the epidemic, including oil drillers, transportation companies, hospitality and retail. 
|
