COVID-19: a gigantic American aid plan in the absence of a social safety net
The amount is historic and emergency aid is a breath of fresh air for the most vulnerable Americans and businesses. Yet that is the minimum the United States could do for an economy without a social safety net.
And it will probably take a lot more to stimulate the world’s first economy decimated by the coronavirus pandemic, experts say on Wednesday, after the announcement of an agreement in the Senate on a gigantic economic plan.
In a country where a multitude of workers receive meager unemployment benefits, where pensions depend in part on the financial markets and where the savings rate is very low, the economic recession following the spread of the virus risks precipitating poverty into millions of people.
The plan, which has yet to gain the backing of the Democrat-majority House of Representatives, “is in itself essential to avoid a deeper crisis than what we are going through,” reacted Gregory Daco, chief economist at Oxford Economics.
Because, he says, the immediate challenge is to “avoid a total collapse” of small and medium-sized businesses that now provide more than half of the jobs in the United States.
“For the time being, that is enough,” said Alan Stuart Blinder, professor of economics at Princeton University even if given the emergency adoption of a plan of unprecedented scale – more than $ 2,000 billion and 6000 billion if we include aid from the Central Bank – “there are bound to be mistakes and omissions”.
For the economist, a former adviser under the presidency of Bill Clinton, this plan will act “much more as a stabilizer or even a tourniquet” than as an economic stimulus.
In other words, it will help stop the bleeding while millions of people are losing their jobs.
Gregory Daco praised in particular the provisions facilitating access to credit for small and medium-sized enterprises and access to unemployment insurance for a period of four months.
“I think we will need more stimulus in the future,” says Alan Blinder, however, while “this horror will highlight something we have always known: the American social safety net is woefully inadequate.”
The long-term challenge is to preserve jobs. And when it comes to small businesses, lending may not be enough, says Rosemary Taylor, a professor at Tufts University.
“Faced with deep economic uncertainty, many small businesses and businesses may hesitate to take on more debt,” she said. “There is a real danger that this epidemic will decimate the main streets of America.”
In the absence of social shock absorbers and faced with the specter of a deep recession in the run-up to the presidential elections, Donald Trump did not hide his impatience on Tuesday, hammering out that he wanted to get everyone back to work from here mid-April.
For the time being, more than half of the American population is now confined to their homes to stem the epidemic which has infected more than 61,000 people and left 849 dead, according to the latest report from Johns Hopkins University.
This remedy could have more serious consequences than the virus itself, says the Republican president.
“Not only is this false, but it is also dangerous both for public health – which is obvious – and for the economy,” retorted Alan Blinder.
The city of Miami, Florida, where many students were still crowded on the beaches last week, forced its 470,000 residents to stay on Tuesday. The streets were empty and the coast closed on Wednesday.
“It may sound strange, but I was waiting for this moment,” said Rosa Jimenez-Cano, a 39-year-old resident, to AFP. “This measure is necessary and it is for our good,” she added, explaining that loneliness was more bearable thanks to social networks.
The federal capital, Washington, for its part announced the closure of non-essential services (gyms, hairdressers, stores …) from Wednesday evening.
According to the World Health Organization (WHO), the United States may soon overtake Europe and become the new global epicenter of the pandemic.
Risk of lasting depression
If there were to be a second wave of infection due to the premature lifting of containment measures, the economic depression would be long-lived this time, warns the economist.
“Everyone would like to go back to work but we cannot revive the economy until the virus is overcome” and as long as people are afraid, insists Gregory Daco.
For Barry Glassner, a retired American sociologist and author of a book entitled “The Culture of Fear”, we will have to be pragmatic.
“At some point, schools, parks and businesses will have to reopen,” he says. “What we should be discussing is not when to reopen – it is a decision for public health experts – but what rational plan can we put in place to open earlier […] with relatively little risk and many advantages? ”
He observes that closing schools harms many children and can even contribute to the spread of the virus if children are taken care of by their grandparents.
On the business side, the smallest can never reopen if they have to stay closed for months.
“So why not authorize the opening of those who can practice social distancing?”, He asks.
New York State, the country’s cultural and economic lung, is the most affected (31,000 cases, 271 deaths).
Arrows in the right direction
New York State, the country’s cultural and economic lung, is the most affected (31,000 cases, 271 deaths), but the measures of confinement and social distancing produce their first effects, said its governor Andrew Cuomo.
“The arrows are going in the right direction,” he said on Wednesday as the increase in daily hospitalizations slowed. The peak of the epidemic is expected within three weeks, he added, however.
As for the funds allocated to the state within the framework of the rescue plan ($ 3.8 billion), Governor Cuomo deplored “a drop in the ocean” of losses, estimated at up to 15 billion of dollars.
This state of nearly 20 million people continues to demand medical equipment from the federal government, starting with thousands of respirators.