The Washington Post - 19.03.2020

A22 eZ sU THE WASHINGTON POST.THURSDAy, MARCH 19 , 2020

the coronavirus outbreak

there is a traffic jam to e ven get on

the m ortgage refinancing

highway r ight n ow. A lot of the

rates that lenders are posting are

intended as a deterrent. T here’s

more demand than supply.”

But d on’t p anic t hat you’re

missing o ut on the b ottom. You

don’t n eed to rush to refinance.

“The Fed can cut rates very

easily, but they h ave a tough time

taking that back l ater by raising

rates,” McBride said. “ The last

time we saw rates at t his low level

[in D ecember 2008], they stayed

there for seven years. The stage is

set for mortgage r ates to remain

at r eally low l evels throughout

2020.”

Pausing will also give you time

to shop around. And don’t j ust

focus on the rate — c ompare the

fees.

Not everyone i s happy a bout

the Fed rate cut.

The losers i n an ultra-low-

interest-rate environment are

savers, many of whom are fleeing

the j aw-dropping plunges of the

stock market t o the s afe h arbor of

deposit a ccounts.

Another savings o ption worth

considering is a no-penalty

certificate o f deposit. With t his

type of C D, y ou can make an early

withdrawal w ithout p aying a

penalty fee.

Following t he past years of

extraordinary market g ains, i t

may pain y ou to park money i n a

relatively l ow-yielding deposit

account. But t hink o f it as a place

to preserve your principal should

you n eed t o tap it i n an

emergency. A nd, Lord k nows,

these are dire times.

Have a question about retirement or

personal finance? Join michelle for an

online Q&A every thursday at noon

eastern time. Readers may write to

michelle singletary at the Washington

Post, 1301 K st. nW, Washington, Dc

20071 or michelle.singletary

@washpost.com. to read previous

color of money columns, go to

wapo.st/michelle-singletary.

balance, a one-percentage-point

rate reduction is going to save the

person a mere $183.

“What really could help

consumers a re monthly p ayment

deferrals,” S chulz added. “We

need to see banks step up a nd

offer t o allow people a break from

paying t hat payment for a month

or two.”

Still, with the United States

facing months of e conomic

uncertainty, eventually the r ate

cut could benefit many

borrowers, said Greg McBride,

chief f inancial analyst at

Bankrate.com. “Somebody who’s

worried a bout losing their job

probably w on’t b e running out to

buy a car just because t he Fed cut

rates,” h e said. “But s ix months

from now, they might. That’s t he

point at w hich we’ll need juice for

the e conomy.”

With the d rop i n the f ederal

funds rate, I ’m h earing from a lot

of folks wondering whether n ow

is the time to refinance t heir

home mortgage.

The average rate on a 30-year

fixed m ortgage hit a n all-time low

of 3.29 percent in t he first week of

March. B ut keep in mind t hat

mortgage rates don’t n ecessarily

track t he Fed’s rate, a ccording to

Te ndayi Kapfidze, c hief

economist for LendingTree.

“There is o ften a

misconception that changes in

the f ederal funds rate affect

mortgage rates, b ut this i s not the

case,” K apfidze s aid. “Rather, t hey

are often influenced by t he same

factors, y et r arely t o the s ame

extent. A t times, t hey even move

in opposite directions.”

From 2015 to 2016, a s the Fed

increased i ts benchmark r ate,

mortgage rates actually fell,

Kapfidze noted.

To h is point, a s refinance

applications have recently been

surging, the 30-year mortgage

rate has b een ticking up.

“The recent drop in m ortgage

rates inundated lenders with

applications,” McBride s aid. “So

In n ormal

times, a cut in the

Federal Reserve’s

benchmark

interest rate

would be m et w ith

enthusiasm by

borrowers,

because it means

that the cost of

credit i s coming

down.

But t hese aren’t n ormal t imes.

On Sunday, t he Fed announced

it would cut the f ederal funds rate

to a range of 0 to 0.25 percent i n

an effort t o encourage the f low of

credit t o consumers and small

businesses. The move l anded l ike

a thud.

Businesses are closing and

consumers a re being asked to

sequester themselves at h ome to

help slow the s pread of the n ovel

coronavirus. People are

purchasing less, and, as a result,

the r ate cut’s impact w ill be

blunted, a ccording to several

experts I interviewed.

Yes, c redit is o n sale, b ut it

won’t m ake much difference if

you c an’t a fford t o buy anything

— e ven if the c ost of your

borrowing has gone down. If

yo u’re laid off and can’t m ake

even your m inimum credit card

payment, a small reduction in

your interest rate isn’t g oing to

have you j umping for j oy.

“The truth i s that if you’re

somebody whose financial life

has really been turned u pside

down by the c oronavirus, the Fed

rate cut isn’t r eally going to do a

lot of good, b ecause t he rate

reduction doesn’t e ven get passed

along for another couple of b illing

cycles,” s aid Matt S chulz, chief

credit a nalyst with LendingTree.

Once they r oll o ut, l ower credit

card rates won’t make a dramatic

dent in people’s d ebts overall.

Ta ke s omeone who has a credit

card balance of $6,000, with an

interest rate of 20 percent, a nd is

paying $ 200 a month. Schulz

points out that, over t he life of the

Fed’s c ut won’t help much right now

Michelle

Singletary

THE COLOR

OF MONEY

BY FAIZ SIDDIQUI

san francisco — About two
weeks ago, as stock markets
plunged, Tesla CEO Elon Musk
tweeted: “The coronavirus panic
is dumb.”
That attitude appeared to
stretch into this week. Despite a
Bay Area-wide shelter-in-place o r-
der, he and other Te sla workers
continued to work at the compa-
ny’s factory in Fremont, part of
Alameda County.
The move placed Musk in an
unusual standoff with local offi-
cials, who said t he factory does not
qualify as “essential business,” the

exemption for the roughly 7 mil-

lion residents who are otherwise

supposed to remain in place. Vio-

lation o f the o rder carries a poten-

tial misdemeanor charge.

“They are not essential during

the health crisis,” said Sgt. Ray

Kelly, spokesman for the Alameda

County Sheriff’s Office, which is

handling coronavirus-related in-

quiries for the county. “It’s not an

issue that we are going to take

lightly, considering the fact that

it’s a big employer in the state and

the c ounty, w ith 10,000 e mployees

that come in every day to work in

the f actory.”

Later Wednesday, Kelly said Te -

sla had committed to reducing its

workforce from 10,000 to 2,500

employees amid the o rder.

Silicon Valley has been at the

heart o f the U.S. n ovel coronavirus

outbreak, with some of the first

reported cases of community

spread. In response, six Bay Area

counties issued a joint order tak-

ing effect Tuesday to limit spread

of the disease, telling everyone to

stay h ome e xcept f or grocery shop-

ping or other necessities.

Other tech giants including A p-

ple, Google and Facebook head-

quartered in the counties affected

by the order said they were send-

ing workers home last week even

before residents were ordered to

shelter in place. M usk appeared to

be the only tech CEO to resist

drastic changes.

Late Monday, Musk sent an

email t o staff saying he would be a t

work Tuesday.

“First, I’d like to be super clear

that if you feel the slightest bit ill

or even uncomfortable, please

don’t feel obligated to come to

work,” h e wrote in an email to staff

late Monday, according to the

website Electrek, which obtained

the m emo shortly after it was sent.

“I will personally be at work, but

that is just me. To tally OK if you

want to stay h ome f or any reason.”

Fremont police spokeswoman

Geneva B osques s aid county a ttor-

neys are discussing the language

in the order and whether Te sla is

among the companies that quali-

fies for a n exemption, but e nforce-

ment was not under discussion.

Te sla did not respond to a request

for c omment Wednesday.

Te sla has been ramping up pro-

duction to deliver its Model Y

crossover SUV this month, its big-

gest launch since the Model 3 in

2017 and expected to be popular

among new buyers who have

flocked from sedans to SUVs in

huge numbers. The company said

on its last quarterly analyst call in

January that it would be shipping

the vehicles earlier than expected,

boosting the company’s already

high stock price. Tesla on Monday

announced that Model Y deliver-

ies h ad begun.

The rollout was important be-

cause Te sla has previously strug-

gled to deliver new vehicles as it

shifted production.

The move to keep the assembly

line going prompted rebukes from

Te sla critics, who said it was a

reckless decision prioritizing a du-

bious short-term benefit over the

long-term i mpact o n the c ompany

and r egion.

Te sla also appears to be alone

among major U.S. automakers in

keeping its factory running. De-

troit’s B ig T hree automakers, G en-

eral Motors, Ford and Fiat

Chrysler, announced Wednesday

they would close t heir plants u ntil

at l east t he end of t he month.

According to the Alameda

County Public Health Department

order issued Monday, businesses

can engage in the “minimum nec-

essary activities to maintain the

value of the business’s inventory,

ensure security, process payroll

and employee benefits” and relat-

ed matters. The company also can

continue the “minimum neces-

sary activities to facilitate e mploy-

ees of the business being able to

continue to work remotely [from]

their residences.”

Scott G alloway, a New York Uni-

versity Stern School of Business

professor of marketing and fre-

quent critic of Musk, s aid the CEO

was putting employees and the

company a t risk with h is d ecision.

“I think every CEO has to make

a decision between the economic

well-being o f the company and the

risk you’re subjecting your em-

ployees to in the longer term,

while opening the company to le-

gal liability,” he said. “I would ar-

gue that the downside risk he’s

subjecting himself and his share-

holders to is much b igger than the

upside.”

[email protected]

Musk had Tesla employees report to work despite order to shelter in place

four-week lockdown would cost

$200 billion, six weeks

$300 billion, eight weeks

$400 billion. These numbers

compare favorably w ith o ther

proposals floating around

Washington.

These tax incentives, coupled

with expanded unemployment

insurance, would go a l ong way

toward e nsuring that most

households had the n ecessary cash

to get through an economic

lockdown, greatly reducing the

severity and length of any recession.

They are relatively quick and easy to

implement. And they avoid the risk

of laid-off workers l osing their

health and other fringe benefits.

They r epresent a fair and efficient

way to keep people employed and

spending.

Of course, there will still be need

for additional programs to help

airlines, cruise lines, hotels and

other industries whose revenue is

evaporating but still have large

non-payroll expenses such as

paying t heir leases and s ervicing

their debts. That c ould come in the

forms of loans, loan guarantees

and temporary equity

investments. While those rescues

could involve hundreds of billions

of dollars more, most or all of that

money would be repaid, and then

some, when sales, profits and stock

prices recover.

[email protected]

That w orks o ut to about

$15 billion a week i n revenue t hat

the g overnment would lose f rom

the p ayroll t ax holiday. Then

there is a $ 300 t ax credit f or those

110 m illion e mployees, a dding

another $33 b illion a week.

Altogether, that w orks out to

roughly $50 billion a week. A

smaller m inority of employees.

How much would all this cost

the Treasury? Here’s a quick back-

of-the-envelope calculation:

Roughly speaking, t here are

the e quivalent o f 110 million full-

time workers in the private sector,

with average income subject to

the p ayroll t ax of $900 a week.

take advantage o f the p rogram

and l ay o ff s ome o r all of their

employees. T hose workers, a long

with the self-employed, c ould be

made eligible for a n expanded

and e xpedited unemployment

insurance program. I suspect that

would involve a small m inority of

firms r epresenting an even

doing.

In a ddition, t he federal

government could offer a tax

credit o f $300 a week f or every

full-time employee

(proportionately less for p art

time) o n the payroll for each week

of the emergency shutdown. T he

credit c ould be applied against

taxes owed in any of the n ext

three years. Again, the c redit

would be f or all workers, n o

matter whether t hey are full time

or part time or how much work

they are actually d oing.

These are not tax b reaks w ith

benefits that accrue primarily t o

business owners and

shareholders. T hey are tax breaks

meant t o keep income flowing to

workers during a short-term

national emergency using the

payment system t hat is already i n

place — t he payroll system — t o

funnel g overnment money t o

households.

Inevitably some companies, or

divisions o f companies, w ill

continue to operate at o r near f ull

capacity d uring t he lockdown,

and c ontinue t o take in most of

their usual revenue. They w ould

neither need nor deserve tax

incentives to keep p aying

employees, a nd I i magine s ome

simple tests c ould be devised t o

make sure they do not qualify.

It i s also p ossible that s ome

businesses would decide not to

It’s p retty clear we
are headed for a
weeks-long period
of economic
lockdown, with
most businesses
closed and
everyone
hunkered down at
home.
Without sales r evenue, most
companies m ay n ot have cash
available to keep p aying workers
or the i ncentive to keep t hem o n
the p ayroll. And without wages
and s alaries, many households
won’t h ave the cash to pay for
even the basics such as food,
house payments and utilities.
The government could do
things s uch as sending every
household a check, as some have
suggested, or extend
unemployment insurance to
every worker w ho loses a job, b ut
that would be expensive and
administratively c hallenging.
Here’s a nother, better idea:
The government could tell
companies that a gree t o retain all
their workers on the payroll that
they can keep the m oney they
would have otherwise withheld
from employee p aychecks o r paid
themselves in p ayroll taxes. T hat
would reduce their payroll costs
by roughly 15 p ercent and a pply
to all employees, n o matter how
much work they are actually

The best stimulus plan? T ell businesses to keep all their workers on the payroll.

Steven
Pearlstein

micHAel s. WilliAmson/tHe WAsHington Post

Workers check their phones Sunday at a nearly empty Walter E. Washington Convention Center.

No purchase necessary. The Spring Home Buyers Guide Sweepstakes (“Sweepstakes”) is open only to individuals who are legal residents of specified

counties in the District of Columbia, Maryland, or Virginia. Entrants must be 18 years of age or older at the time of entry. This Sweepstakes is sponsored

by WP Company LLC d/b/a The Washington Post (“Sponsor”). Employees, officers, directors and representatives of Sponsor and the prize providers, and

each of their respective affiliates, and immediate family members of, and any persons domiciled with, any such persons are not eligible. Void outside of the

District of Columbia, Virginia and Maryland and where prohibited by law. Sweepstakes subject to all federal, state and local laws. To enter, complete the

entry form on the Sweepstakes entry page found at https://sweepstakes.newhomesguide.com, or, mail a 3.5” x 5.0” postcard with your complete name,

address, daytime phone number, email (optional), and date of birth to The Washington Post, Client Solutions - SHBG Sweepstakes, 1301 K Street, NW,

Washington, DC 20071. The entry period of the Sweepstakes begins at 12:01 AM Eastern Time (“ET”) on March 6, 2020 and ends at 11:59 PM ET on April

15, 2020. Limit one entry per person is permitted. One grand prize winner will receive a series of credits toward various moving and home improvement

services valued at approximately $10,005. Limitations on when and where prizes can be redeemed apply. Winner will be chosen as explained in official

rules. For complete rules, including a full list of eligible counties and restrictions on prizes, visit https://sweepstakes.newhomesguide.com/rules.

Enter and read contest rules at

http://www.postgiveaway.com

Enter The Washington Post’s

for a chance to win a value of $10,000

in home and moving services!

SPRING

HOME BUYERS GUIDE

SWEEPSTAKES!

20-0173-04

Package consists of prizes from these companies

Are you

looking

to buy a

home?

English Country Gardens