The Economist USA 03.28.2020

22 United States The EconomistMarch 28th 2020

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net decidedly more European, at least tem-

porarily. The federal government would

pay to top up unemployment-benefit lev-

els by $600 a week—an enormous increase,

given that the current weekly average is

$385. The set of people eligible for benefits

would also be expanded to include inde-

pendent contractors, such as gig-economy

workers. Those who have been laid off but

not fired could receive compensation for

lost hours. And the length of the benefit

period would be extended from the usual

26 weeks to 39 weeks. The cost of all of this

is thought to be $260bn: a serious expan-

sion of a targeted programme.

A similarly gargantuan wad of cash—

$250bn—will be spent on a less targeted

scheme, sending cheques to Americans di-

rect from Uncle Sam. Below some generous

income thresholds ($75,000 a year for a

single person and $150,000 for a married

couple) every family can expect $1,200 per

adult and $500 per child. This is the best

version of a cash transfer that was pro-

posed. Previously the White House had

pushed the idea of a payroll-tax holiday; an

early version of the stimulus bill ignored

people who did not file taxes. Both would

have excluded those with the lowest in-

comes from an ostensibly universal pro-

gramme. Reaching everyone eligible now

will require ingenuity, such as using ad-

ministrative data from states, says Sam

Hammond of the Niskanen Centre, a think-

tank. But even if sent quickly, the cheques

could be both too small for those who need

them and too big for those who do not.

The government is also expected to set

aside $500bn to stabilise firms and states.

The capital could facilitate lending several

times larger than that. Democrats in Con-

gress and the White House got stuck on a

(relatively) small portion of the pro-

gramme, the $75bn set aside to bail out em-

battled big firms like airlines and those

deemed critical to national security—be-

cause of the latitude the treasury secretary

would have to set and disclose the terms of

loans. A compromise struck in the dead of

night bulked up independent oversight.

A more intriguing scheme is the $350bn

set aside to save small and medium-size

firms (those with fewer than 500 employ-

ees). The programme would give loans of

up to $10m without interest or fees to pay

for employees, rental costs and sundry oth-

er expenses. These would then be forgiven

in proportion to the share of staff spared

the sack: a firm that kept all employees

would owe nothing; one that dispensed

with half would owe half, and so on.

This is a more complicated idea than

those devised by European finance minis-

ters facing down the pandemic. Rishi Su-

nak, the British chancellor, pledged to pay

up to 80% of wages for furloughed workers;

the Danish government could pay up to

90% of the costs. The added hurdle in

America may mean that the most sophisti-

cated operations get the grant-loans (or

“groans” in bureaucratic argot), while

mom-and-pop operations languish. It may

also mean that even more money will be

needed. Research from Glenn Hubbard, an

economist at Columbia Business School,

and Michael Strain of the American Enter-

prise Institute, a think-tank, estimates that

total needs could amount to $1.2trn—

roughly triple the sum allocated. With the

ink not yet dry on the phase-three bill, big-

ger bail-outs may be needed in future.

The extraordinary legislation is not in-

tended to avoid the recession that already

seems to have arrived, but to spur the fast-

est possible rebound. This of course re-

quires that the cause—the covid-19 pan-

demic—is effectively dealt with first.

But after a brief period of taking the vi-

rus seriously, President Donald Trump

seems eager to lift restrictions as soon as

possible. He has taken to saying that “the

cure cannot be worse than the problem it-

self”, and that he wants the country

“opened up and just raring to go by Easter”,

which epidemiological projections sug-

gest is unwise. The collapse of the stock-

market, which used to be Mr Trump’s ba-

rometer of success, may be spooking the

president. Markets jumped in anticipation

of the coming stimulus. But pre-emptively

relaxing the restrictions would harm both

public health and the economy.

Because health authority is devolved to

the states, it is unlikely that Mr Trump

would pre-empt local declarations of

emergency. But some states could follow

suit, and the president’s supporters might

not adhere to the recommended course of

social distancing. Already, the lieutenant-

governor of Texas has suggested that the el-

derly might risk death for the sake of the

economy. Liberty University, an evangeli-

cal Christian institution led by a devotee of

the president’s, is proudly inviting thou-

sands of students back to campus in de-

fiance of public-health advice.

Mr Trump appears to be defaulting into

an old playbook—vacillating wildly in the

hope of winning concessions. What may

work with Democrats or North Korean dic-

tators has no chance against a virus, how-

ever. And as things worsen, as seems likely,

such irresolution may look like political

malpractice. Already, New York appears to

be a new disease hotspot. “The apex is

higher than we thought and the apex is

sooner than we thought,” said Andrew Cu-

omo, the governor of New York, in his ad-

dress to citizens. He is warning that the

city’s health system could be overwhelmed

by lack of ventilators and protective equip-

ment for staff. The medicine—a controlled,

national shutdown of the economy—may

be strong stuff. But a premature reopening,

leading to rampant transmission of the vi-

rus, could produce something far worse. 7

A

mong manyworrying data points from

the coronavirus crisis, one in particu-

lar has struck Americans. In a report pub-

lished on March 18th the Centres for Dis-

ease Control and Prevention (cdc) showed

that of the 508 known patients to have been

hospitalised in the United States by March

16th, two-fifths were younger than 55. Of

those, half were between 20 and 44. For a

virus that is meant mostly to affect elderly

people, those figures were extremely wor-

rying. In the overall population adults aged

19 to 55 make up 47% of the population.

The report set off a storm. On March

22nd Anthony Fauci, a leading member of

the White House’s task-force on the dis-

ease, noted that young people are certainly

not immune. “All bets are off, no matter

how young you are, if you have an underly-

ing, serious medical condition,” said the

doctor. Alexandria Ocasio-Cortez, a 30-

year-old Democratic congresswoman, told

young people they should be concerned

not only for their elderly relatives but also

for themselves: “Let me tell you something,

in the state of New York, about 55% of our

cases are with folks 18 to 49.”

It remains to be seen whether young

people will continue to make up such large

proportions of those hospitalised. But it

seems unlikely. Since the cdc’s research

was published, the number of confirmed

cases in America has leapt from 4,226 to

Younger Americans have so far been

more vulnerable. This may not last

Viral exceptionalism

The bills you have

to pay

Gee my life’s a funny thing