The Economist UK - 28.03.2020

The EconomistMarch 28th 2020 39

1

E

ven to thehousebound and socially

distanced, the signs of a contraction are

apparent. The 18th Street corridor of Adams

Morgan, a typically bustling stretch of res-

taurants and shops in Washington, dc, is

shuttered—closed as part of the nation-

wide effort to contain the epidemic of co-

vid-19 that had, as of March 25th, infected

65,778 Americans and killed 942, according

to Johns Hopkins University. One fledgling

business—a new bar called Death Punch—

never managed to open its doors. Down the

road, an established whiskey bar called

Jack Rose has been selling off its gargan-

tuan collection at discount to support its

staff. The queue for it snaked several

blocks—a long dotted line of aficionados

standing a careful six feet apart.

These are just the premonitions of the

pain to come. Unemployment will rocket

as much of the economy is put into a sort of

medically induced coma. So many unem-

ployment claims are being filed in Ohio

that the state website has crashed. The na-

tional weekly unemployment numbers

that will be released on March 26th are

widely expected to be the worst in history.

Goldman Sachs has predicted that there

could be 2.25m new claims over the week—

triple the previous record. And just as the

covid-19 epidemic has not yet reached its

apex, neither has the economic crisis. Mor-

gan Stanley predicts that gdpwill fall by 8%

year-on-year in the second quarter and un-

employment will rise to 12.8%, compared

with just 3.5% in February.

To head off the damage, Congress has

prepared the largest fiscal stimulus in

modern history. Its provisions—including

bail-outs for firms both big and small, ex-

panded unemployment-insurance bene-

fits and a straight cash transfer to Ameri-

cans—are expected to cost close to $2trn,

roughly one-tenth of gdp. This is the third

substantial piece of legislation to deal with

covid-19. Even this may not be enough.

Whole industries rely on congregating

people. So too, unfortunately, does the vi-

rus. Twelve states have ordered all non-es-

sential businesses closed. Seventeen

states, covering half the country’s popula-

tion, have urged residents to stay at home.

Many white-collar tasks can just about be

performed remotely. But cruelly, those

likeliest to lose income or their jobs are in

more precarious, less well-paid indus-

tries—restaurant staff (of which there are

9.6m), retailers (8.8m) or hotel workers

(2m). If they lose their livelihoods, the ef-

fects will ripple through the economy.

One corrective for this problem is un-

employment insurance. Yet this is not as

robust as in other parts of the rich world.

The American version replaces a smaller

share of previous income than the average

in the oecd, a club of mostly rich countries,

and declines faster with time. Individual

states, which administer the programme

jointly with the federal government, differ

in their generosity: Mississippi caps its

maximum benefits at a paltry $235 a week.

At the insistence of Democrats, Con-

gress would make this part of the safety-

Congress responds

A $2 trillion bazooka

WASHINGTON, DC

A habitually dysfunctional system leaps into action

United States

40 Viral exceptionalism

41 Love under lockdown

41 Covid-19 and the locked-up

42 Teenage sexting

43 The Green Party

44 Lexington: Sore and feverish

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