WASHINGTON, D.C. – The government has a palette of options it can use to shore up an economy imperiled by anxiety over the coronavirus outbreak. They start with the “middle-class” payroll tax cut that President Donald Trump is suggesting and include quicker, more targeted federal aid as well. But the options could come with pitfalls and may raise unrealistic expectations.
The White House and Congress have started wrangling over measures to spark the wounded economy, as fear around COVID-19 has threatened to tip it into recession. The crisis of confidence over the virus, with more than 118,000 people infected worldwide and 29 deaths in the U.S., is keeping American consumers — the spending engine of the economy — away from public places like shopping malls, grocery stores and movie theaters.
Beyond the payroll tax cut, stimulus measures that may be considered include aid to wage earners missing work because of illness or quarantine who don’t receive sick pay, special loans for small businesses, subsidies or tax relief to affected industries like airlines, hotels and cruise ships, and aid to certain parts of the country bearing the brunt of virus illnesses and deaths.
Aiding wage earners who don't receive sick pay is a top priority along with the payroll tax break, Larry Kudlow, a senior economic adviser to Trump, told reporters at the White House Tuesday evening. He said they're also considering assistance to small and medium-size businesses and possibly to some distressed industries.
“Everything the Trump administration has proposed so far is way too small,” says Simon Johnson, an economics professor at MIT’s Sloan School of Management who’s an expert on financial and economic crises.
Johnson wants to see emergency sick pay covered substantially by the government, overtime paid to health care workers, and a massive transfer along the lines of a proposal by a top economic adviser to President Obama. Congress would send every American adult $1,000 and $500 to every child under Jason Furman’s proposal, at an estimated ultimate cost to taxpayers of $350 billion.
Trump’s signature proposal of a payroll tax cut has spurred criticism from both conservatives and liberals, and it met bipartisan resistance Tuesday on Capitol Hill.
“It’s a very untargeted measure,” said Joseph Stiglitz, a Nobel laureate economist who teaches at Columbia University. “Some Americans are at the brink. They need to show up to work to feed their families.”