The Economist UK - 28.03.2020

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The EconomistMarch 28th 2020 39

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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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