The EconomistMarch 28th 2020 Leaders 111N
o textbook wasever written to tell economists what to do
in the face of the extraordinary economic hiatus caused by
covid-19. Yet as they consider the deserted malls, abandoned of-
fices and billions of lives on hold, the overarching responsibil-
ities of economic policymakers are clear. First, they must protect
the incomes of those who cannot work during lockdowns
through no fault of their own. Second, they must make sure that
growth bounces back fast when daily life resumes.
The enormous emergency spending bill due to be passed by
America’s Congress—which will cost the taxpayer about $2trn
(10% ofgdp) up front and support much more in new lending—
goes some way to discharging both duties. It beefs up unemploy-
ment benefits, provides emergency loans and grants to small
businesses, and gives $1,200 unconditionally to
most Americans. When combined with the ul-
tra-loose monetary policy of the Federal Re-
serve, which this week announced that it would
buy government and mortgage debt in unlimit-
ed quantities, the fiscal boost will underpin
growth once lockdowns are lifted. America now
stands in contrast to some other parts of the
world, such as the euro area, where markets ex-
pect a prolonged disinflationary slump (see Finance section).
But the bill also brings dangers. Markets cheered it not just
because of its likely effect on growth, but also because it directly
benefits investors. Large firms will have access to cheap taxpay-
er-financed loans on an unprecedented scale. The Fed had al-
ready announced, on March 23rd, that it would buy companies’
short-term debt. Congress is now giving the central bank a capi-
tal infusion to support vast direct lending to corporate America.
Emergency interventions like these shift the costs of the crisis
away from investors and towards taxpayers (see Free exchange).
That is partly necessary, because letting a large number of big
firms go bankrupt could prove so disruptive that it would worsen
the crisis. And investors are not completely undeserving benefi-ciaries. No firm could have been expected to stockpile cash to
pay workers to do nothing in the event of a government-enforced
lockdown. The real potential unfairness in the stimulus is that
aid to large firms is the part of the rescue package that is most
likely to work without a hitch. Sophisticated corporations will
have no trouble borrowing from the Fed or from backstopped
capital markets, even as they lay off some workers (prohibited
only “to the extent practicable”). But aid to small firms, and di-
rectly to the jobless, may turn out to be less than comprehensive.
Small businesses employ 52% of private-sector workers. Half
have a cash buffer of less than one month, by one estimate. The
bill starts a new programme to lend to them directly. The part of
any government loan used to pay wages, utility costs, rent or
mortgages will be forgiven—exceptif firms lay
off workers, in which case the subsidy will be re-
duced in proportion to the number of jobs lost.
This scheme is more complex than those in
some European countries, under which govern-
ments are paying most of the wages of suspend-
ed workers. It is hard to imagine that its admin-
istration will be quick and efficient. And some
analysts think the pot of money on offer is too
small (see United States section). Those most adept at navigating
the bureaucracy may get most of the benefit.
Cash handouts to the public are simple enough. But $1,200 is
not much help for a laid-off worker. The jobless will rely on the
bill’s temporary expansion of unemployment insurance benefits
by $600 per week. Yet America cannot construct an adequate so-
cial safety-net overnight. For example, 8.5% of Americans lack
health insurance. Some workers who are laid off will join their
ranks just as they face a heightened risk of falling ill.
Make no mistake: we would vote for the bill, most of which is
urgent and necessary. But it is far from perfect. And just like past
emergency stimulus, it could work better for big firms than for
anyone else, leaving a lingering sense of injustice. 7Mixed medicine
S&P 500 share index
United States, 1941-43=
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2,March 202018 19 20 23 24 25Congress is poised to pass an emergency stimulus. It is imperfect but necessaryAmerica’s rescue packageA
s covid-19 beganspreading across Iran in February, the re-
gime held a rigged election. Weeks later, when nearly 10% of
Iranian mps were infected and it was clear the country had a pro-
blem, the ruling clerics refused to close crowded holy spots.
Even as it dug mass graves, the government hushed up the scale
of the epidemic. Now its leaders are propounding conspiracy
theories, such as that covid-19 is an American bioweapon. Re-
jecting an offer of American aid, Iran’s supreme leader said: “Pos-
sibly your medicine is a way to spread the virus more.”
Officially, Iran has suffered over 27,000 cases and 2,
deaths. All countries undercount, but Iran wilfully minimisedthe numbers at the outset. Hundreds of thousands have been in-
fected and many will die. That is partly because American sanc-
tions have made it harder to cope. But Iran’s leaders have also
mismanaged the crisis. Like officials elsewhere, they have been
refusing to quarantine cities or ban large gatherings. Worse, they
are placing their confrontational worldview above public health.
The clerics claim they are doing a fine job. Iran has produced
more face masks than Italy and tested more people than Britain.
Military factories are now making personal protective equip-
ment, oxygen canisters and hospital beds. The government has
turned stadiums into isolation centres and increased the num-Get serious
Conspiracy theories are no remedy for the virusIran and covid-