Coronavirus will damge the economy

There is very little the government can do to prevent the coronavirus from damaging the economy. The usual tools like tax cuts and stimulus spending won’t restore cancelled conferences, concerts or sporting events.

Nor will they persuade customers to go out for meals or shopping, especially when public health officials are urging “social distancing” to slow the spread of the virus.

Be glad that we live in Canada rather than in the United States. The approach of both the federal and provincial governments as to health and economic measures is thoughtful, proactive and motivated with the twin aims of limiting the spread of the virus and minimizing its economic impact upon individuals and the economy as a whole.

Contrast that with what’s happening south of us. The president seems incapable of dealing with any policy challenge without first considering its impact upon his image and the possible adverse consequences to his popularity and re-election.

He has tried to portray the threat of the spread of the virus as a hoax contrived by the Democrats for political purposes and of no real consequence.

He has tried to stifle the comments of experts in public health matters particularly when it comes to dealing with the pandemic. And the economic actions he is proposing will be less than effective, motivated as they are more by shortterm political concerns than what might be most effective in the face of collapsing demand as consumers stay home in droves. The goal of proper government policy in a crisis is what is best for the nation rather than what benefits Donald Trump.

Proposed tax cuts, a favourite tactic of both the president and his party stalwarts, probably will be too small and poorly targeted. Upper levels of income earners do not need such cuts.

And the sectors most affected by the spread of the virus — airlines, the hospitality industry and those servicing and working in the cruise industry‚ need specifically targeted assistance. Those members of the labour force who are quarantined and thus foregoing income need immediate assistance to pay the rent and put groceries in the pantry. And business of all sizes may require immediate, if temporary, assistance.

Identifying all who will suffer loss of income is difficult. Uber drivers, itinerant musicians in pubs and restaurants and casual workers in child care facilities may not be actual employees of any establishment and reaching them will be difficult.

Proposals to deal with the problem of identifying people impacted by the economic consequences of the virus spread have offered some novel approaches. One economist suggested governments send $1,000 to every adult and $500 for every child. That type of cash infusion would help cover rent or mortgage payments and purchases of food without having to determine who qualifies for or deserves such funding. The problem, of course, is that such a program in the U.S. would costs more than $350 billion and, thanks to Trump’s tax cut, America’s deficit is already at over

$1.1 trillion.

Another problem is that while some sectors needing help are easy to identify (airlines, tourism, hospitality) the fullpotential impact of this adverse situation is still unknown. The gyrations of the equity markets notwithstanding, until we have a better grip on exactly where the soft spots in the economy are and their expected longevity, targeted government action, as proposed at all levels of government in Canada, is a much better course of action than the essential grandstanding proposed by

Mr. Trump.

It will be a while before we know the extent of the economic harms. In the meantime, wash your hands, follow the advice of public health officials, and, if you feel ill, stay at home.