Investors, airlines, cruise operators, and newsletter writers who miss their work sweaters were watching President Trump for any news of a stimulus measure to cushion the economic impact of the coronavirus.
- Of course, the most important thing is to contain the virus’s spread. But…that’s for health experts, not economists.
What Trump said
In a brief Oval Office address last night, President Trump laid out his plan to respond to the crisis:
- He’s restricting some travel from Europe (minus the U.K.) for 30 days.
- The IRS will be instructed to push back the April 15 tax payment deadline.
- The president also called for low interest loans for small businesses and a payroll tax cut from Congress.
Investors were…not impressed. Futures tied to major stock indexes tanked after the speech, which did not mention any aggressive actions like infusions for suffering industries or paid sick leave. The White House also had to correct some of Trump’s statements following his address.
Zoom out: There is precedent for government bailouts in times of crisis. The U.S. government provided $15 billion to airlines after 9/11, $700 billion to banks to army-crawl through the 2008 financial crisis, and $17 billion to automakers just after that.
- Those episodes show us that timeliness is key. In 2008, Congress dragged its feet until it was almost too late, friend of the Brew and bailout expert Andrew Ross Sorkin writes.
Will the administration announce something more?
We just don’t know. Fed Chair Jerome Powell recently met with President Trump and Treasury Secretary Steve Mnuchin. Powell has already cut interest rates and indicated he’s willing to keep up the slashing.
But it’s important to remember a pandemic is different from a financial crisis—bargain-basement interest rates can help keep businesses afloat, but the “social distancing” measures recommended by health officials mean canceling events and avoiding crowded places, which will curb spending. Interest rates can’t fix that.
Looking ahead…the U.S. House will vote on a stimulus package compiled by the Democrats (who hold a majority) today.