The EconomistMarch 28th 2020 Leaders 91N
o textbookwaseverwrittentotelleconomistswhattodo
inthefaceoftheextraordinaryeconomichiatuscausedby
covid-19.Yetastheyconsiderthedesertedmalls,abandonedof-
ficesandbillionsoflivesonhold,theoverarchingresponsibil-
itiesofeconomicpolicymakersareclear.First,theymustprotect
the incomes of those who cannot work during lockdowns
throughnofaultoftheirown.Second,theymustmakesurethat
growthbouncesbackfastwhendailyliferesumes.
Theenormousemergencyspendingbillduetobepassedby
America’sCongress—whichwillcostthetaxpayerabout$2trn
(10%ofgdp) upfrontandsupportmuchmoreinnewlending—
goessomewaytodischargingbothduties.It beefsupunemploy-
mentbenefits,providesemergencyloansandgrantstosmall
businesses,andgives$1,200unconditionallyto
mostAmericans.Whencombinedwiththeul-
tra-loose monetary policy ofthe Federal Re-
serve,whichthisweekannouncedthatit would
buygovernmentandmortgagedebtinunlimit-
ed quantities, the fiscal boost will underpin
growthoncelockdownsarelifted.Americanow
standsincontrasttosomeotherpartsofthe
world,suchastheeuroarea,wheremarketsex-
pecta prolongeddisinflationaryslump(seeFinancesection).
Butthebillalsobringsdangers.Marketscheereditnotjust
becauseofitslikelyeffectongrowth,butalsobecauseit directly
benefitsinvestors.Largefirmswillhaveaccesstocheaptaxpay-
er-financedloansonanunprecedentedscale.TheFedhadal-
readyannounced,onMarch23rd,thatitwouldbuycompanies’
short-termdebt.Congressisnowgivingthecentralbanka capi-
talinfusiontosupportvastdirectlendingtocorporateAmerica.
Emergencyinterventionsliketheseshiftthecostsofthecrisis
awayfrominvestorsandtowardstaxpayers(seeFreeexchange).
Thatispartlynecessary,becauselettinga largenumberofbig
firmsgobankruptcouldprovesodisruptivethatit wouldworsen
thecrisis.Andinvestorsarenotcompletelyundeservingbenefi-ciaries.Nofirmcouldhavebeenexpectedtostockpilecashto
payworkerstodonothingintheeventofa government-enforced
lockdown.Therealpotentialunfairnessinthestimulusisthat
aidtolargefirmsisthepartoftherescuepackagethatismost
likelytoworkwithouta hitch.Sophisticatedcorporationswill
havenotroubleborrowingfromtheFedorfrombackstopped
capitalmarkets,evenastheylayoffsomeworkers(prohibited
only“totheextentpracticable”).Butaidtosmallfirms,anddi-
rectlytothejobless,mayturnouttobelessthancomprehensive.
Smallbusinessesemploy52%ofprivate-sectorworkers.Half
havea cashbufferoflessthanonemonth,byoneestimate.The
billstartsa newprogrammetolendtothemdirectly.Thepartof
anygovernmentloanusedtopaywages,utilitycosts,rentor
mortgageswillbeforgiven—exceptiffirmslay
offworkers,inwhichcasethesubsidywillbere-
ducedinproportiontothenumberofjobslost.
This schemeismore complexthanthose in
someEuropeancountries,underwhichgovern-
mentsarepayingmostofthewagesofsuspend-
edworkers.Itishardtoimaginethatitsadmin-
istrationwillbequickandefficient.Andsome
analyststhinkthepotofmoneyonofferistoo
small(seeUnitedStatessection). Thosemostadeptatnavigating
thebureaucracymaygetmostofthebenefit.
Cashhandoutstothepublicaresimpleenough.But$1,200is
notmuchhelpfora laid-offworker.Thejoblesswillrelyonthe
bill’stemporaryexpansionofunemploymentinsurancebenefits
by$600perweek.YetAmericacannotconstructanadequateso-
cialsafety-netovernight.Forexample,8.5%ofAmericanslack
healthinsurance.Someworkerswhoarelaidoffwilljointheir
ranksjustastheyfacea heightenedriskoffallingill.
Makenomistake:wewouldvoteforthebill,mostofwhichis
urgentandnecessary.Butit isfarfromperfect.Andjustlikepast
emergencystimulus,itcouldworkbetterforbigfirmsthanfor
anyoneelse,leavinga lingeringsenseofinjustice. 7Mixed medicine
S&P 500 shareindex
UnitedStates,1941-43=
2,
2,
2,
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-