Austin’s SXSW experience does not augur well for the U.S. economy. If the virus continues to spread, it will act as a sort of tax on group formation and physical-space community. Every component of the tourism economy will falter, including airlines, hotels, restaurants, museums, and amusement parks. As more Americans self-quarantine, ride-share and taxi drivers will lose income and gas stations will struggle. With their income pinched, workers in each of those fields will spend less in the economy.
Read: The problem with telling sick workers to stay home
Basic macroeconomic theory says there are two ways to address a crisis like this.
The first is monetary policy, which would typically mean central banks cutting short-term interest rates to stimulate economic activity. But interest rates are already at historic lows, which reflects a need for other forms of stimulus.
The second is fiscal policy. That means the U.S. government giving people and firms money—either without strings attached or for earmarked purposes, such as building infrastructure. With long-term interest rates under 1 percent, borrowers are essentially paying the U.S. to hold on to their money. The federal government could use this opportunity to do a number of things, such as finance green infrastructure. But first, it should pass a massive fiscal stimulus to confront the economic effects of the viral outbreak.
Read: What you can do right now about the coronavirus
What might an Antiviral Stimulus look like? Here are four ideas:
- Cold, hard cash. Giving Americans money should make them more willing to withdraw from work, more comfortable about an extended break from public life, and more stable if their line of work is threatened by the epidemic. In 2008, George W. Bush signed an economic stimulus that mailed checks to families within six weeks of the bill’s passage. The White House could do a beefed-up version of that stimulus by writing every adult a check for $1,500 with an extra $1,000 per child.
Instead, the Trump administration has proposed a payroll-tax cut. Although that’s a fast way to get workers money, the largest benefits of such a plan would flow to upper-middle-class workers, who can often do their jobs remotely. The front line of the epidemic is the leisure and hospitality sector, where low-wage workers constantly interact with people face-to-face. What these workers really need is universal paid sick leave.
- Paid sick leave. Before the coronavirus outbreak, the lack of paid sick leave in this country was merely morally indefensible. During a viral outbreak, it’s also just plain dumb. As Amanda Mull has written for The Atlantic, millions of American workers cannot take time off in the event of an illness, which means they are encouraged to remain at work, where they become unwitting vectors of mass contamination. Fortunately, a solution may be imminent. White House advisers have reportedly briefed the president on such a policy, and House Democrats plan to introduce guaranteed sick leave for certain workers in a forthcoming bill. Even if this bill passes, however, Washington will still have to deal with likely increases in unemployment.
- Expanded unemployment insurance. Unless we get very lucky, the epidemic will cost many thousands of people their jobs at the same time that their families are either going through a medical emergency or feeling terrified that illness is imminent. The federal government jointly funds jobless benefits with the states, but in this crisis, Washington should fully fund a large increase in the dollar amounts of unemployment insurance. This would help stabilize the finances of individuals and families who lose their jobs on account of a viral recession.
- Emergency funds for state and local governments. A large part of the 2009 stimulus was earmarked for states and cities to make up for the tax revenue they would lose after employees lost their jobs. A sharp recession in 2020 will require the same intervention. In this crisis, emergency funds could also help states pay for expanded health-care treatment, because 10 percent of state spending goes to hospitals.