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How Far Should Trump’s Coronavirus Economic Stimulus Go?

Trump Coronavirus Stimulus
The computer-driven stock market rollercoaster and the hit airlines, hotels, cruise lines, amusement and event industries are taking due to coronavirus fears have prompted President Trump to call for a variety of economic stimulus measures to reassure and stabilize the economy.

A day after the stock market experienced its worst day in a dozen years, Trump renewed his call for the Fed to cut interests rates to match weaker "competitor" economies.

In a pair of tweets Tuesday morning, reported by our friends at NewsMax, President Donald Trump revisited his criticism of the Federal Reserve, blasting the central bank as "pathetic" and "slow moving."

"Our pathetic, slow moving Federal Reserve, headed by Jay Powell, who raised rates too fast and lowered too late, should get our Fed Rate down to the levels of our competitor nations. They now have as much as a two point advantage, with even bigger currency help. Also, stimulate!"

In a second tweet, he wrote that "the Federal Reserve must be a leader, not a very late follower."

The Hill’s Sylvan Lane and Morgan Chalfant reported that White House economic adviser Larry Kudlow said Friday that the administration is considering “targeted” relief to workers and businesses hindered by the steadily growing cases of the COVID-19 coronavirus.

Kudlow expressed confidence that the U.S. economy would not need a significant stimulus package to overcome a broad economic slowdown, but floated measures meant to protect industries suffering from efforts to contain the virus.

“The story I am trying to tell is a story of timely and targeted microforms of assistance, not gargantuan, across-the-board, throw money at the problem, which has not worked in the past,” Kudlow told reporters at the White House.

“Because we think that we will get out of this in months,” Kudlow added according to Lane and Chalfant’s reporting.

Kudlow insisted that the White House believes the U.S. economy to be “fundamentally sound.” He would not say when the administration expected to make a decision on the “timely and targeted” relief that he referenced.

In an interview with CNBC, also reported by Lane and Chalfant, Kudlow signaled that the administration was not considering a larger stimulus package but that it could take steps to help certain sectors, mentioning the airline industry in particular.

However, Democrats and some economists oppose economic stimulus measures at this time.

“I don't know that talking about additional tax cuts now, other than for political purposes, is what we ought to be focused on. What we ought to be focused on is what is our medical response to this,” said House Majority Leader Steny Hoyer (MD-5) in a statement reported by Lane and Chalfant.

Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former top economic adviser to George W. Bush and John McCain, told Josh Barro of New York Magazine he does not think a fiscal stimulus package is warranted at this time. Holtz-Eakin says the most important policies to prevent economic damage from an epidemic are the policies that fight the epidemic directly. That includes public spending measures such as the approximately $8 billion spending package that congressional leaders already agreed upon and sent to the President. It also includes efforts to shape public reaction to the epidemic, ensuring that the public takes appropriate action to reduce the spread of disease without becoming unreasonably fearful.

As for the merits of fiscal stimulus, Holtz-Eakin noted that supply shocks — such as disruptions to supply chains — can’t be fixed through fiscal stimulus. A demand shock due to social-distancing measures during an epidemic (like people forgoing cruises and staying away from the mall) is likely to be appropriate and unlikely to be changed through economic policy. And as for the concerns that a demand shock could persist after the epidemic is over? Holtz-Eakin said demand tends to recover robustly after disasters, as people go out and buy the backlog of things they didn’t buy while they were disconnected from the economy.

Holtz-Eakin’s views seem decidedly out-of-synch with President Trump, who said Monday that the White House is planning to ask Congress to pass a payroll tax cut and relief for hourly wage earners in order to assist workers who may be feeling the financial pinch amid the coronavirus outbreak.

Trump said that top administration officials will be meeting with Republican members of the House and Senate on Tuesday to discuss the possible payroll tax cuts and help for hourly workers.

"Very substantial relief that's a big number," Trump said. "We're also going to be talking about hourly wage earners getting help so that they can be in a position so they are not going to ever miss a paycheck," the President said according to reporting by NPR’s Bobby Allyn.

The President’s strategy to help hourly workers and those whose income is derived from what has come to be called the “gig economy” has yet to be articulated, but it might include some form of supplemental unemployment insurance or other cash assistance.

Post-9/11 and during other times of economic stress conservatives have been very careful, even skeptical, of industry-specific bailouts and extensive government intervention in the economy. However, the coronavirus economic panic defies conventional arguments about moral hazard and other arguments against intervention in the economy that were raised during the 2008 Great Recession.

We are interested to know and share what conservatives think about the possible coronavirus economic stimulus package – please tell us what you think in the comments section below.

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Economy

Income Tax cuts are welcome because we are on the downside of the Lauffer Curve. They will cause increased economic activity and increased tax revenue. Will Civid19 be worse than the normal flu remains to be seen. Stopping travel from China early on and limiting to and from Italy, Iran and other hotbeds seems prudent. Making too much Federal money available risks having states jump the gun just for a piece of the pie. Elderly facilities should use universal precautions and monitor visitor and employee health/cleanliness. But let us not go overboard and tank industries and economies because of fear. What next, travel restrictions every flu season?

help for coronavirus victims

I think the President's program should be tried, and if congress won't pass it, it's on them, not him. According to what I've read we need to keep the number of new cases down, to flatten the incidence curve, and paying folks to stay home until that happens deserves a chance to work.