Coronavirus is having a disastrous effect on the economy and whether Donald Trump likes it or not, the United States is no exception. While the Dow Jones recovered from its 3,000-point drop on Monday with a 1,000-pound rebound yesterday, it’s not alarmist to say that Americans could be entering into a recession.
After initially burying his head in the sand about the impact Covid-19 could have, the president is finally waking up to this new reality. Trump certainly admitted as much earlier this week, when he conceded that what he called the 'invisible enemy' could do untold damage to America's economy. For Trump, this is particularly bad news. Such a financial decline – whether it is his fault or not – would hurt Trump politically as much as it hurts the working man and woman in their wallets. No politician in Washington wants economic contraction while they’re in office, especially a president prone to outbursts, obsessed with his self-image, and weeks away from formally kicking off his re-election campaign.
The Trump administration has a plan for saving the American economy from a financial calamity, and it includes writing checks for tens of millions of Americans. The idea is embedded in a much larger £700bn ($850bn) plan to stimulate the economy before the recession sticks to the American taxpayer like glue. The plan includes a substantial bailout of sorts for the airline industry, which has been swallowed whole by the virus. There is also financial assistance for small businesses like bars and restaurants that are shutting their doors due to orders from state and city governments. This package is in addition to new guidance from the administration allowing Americans to defer their tax payments for 90 days. Treasury Secretary Steven Mnuchin reflected Trump’s urgency, telling reporters 'We’re looking at sending checks to Americans immediately. And I mean now, in the next two weeks.'
In normal times, a government cash infusion into the U.S. economy would be viewed sceptically by congressional Republicans, many of whom screech at anything that sounds like government intervention in the financial markets. A decade ago, Republican lawmakers fought president Barack Obama to the death on his own £650bn ($780bn) stimulus bill. Much like Trump’s idea today, Obama’s plan was a wholesale government investment in certain industries to stabilise the rolls and help Americans who were struggling financially (when Obama lobbied for the legislation, the U.S. unemployment rate was over nine per cent). Senior Republican lawmakers like John Boehner took to the talk shows and expressed strong opposition to the stimulus plan, calling it a behemoth of a bill that reflected Obama’s tax-and-spend, worry-about-the-deficit-later mentality.
Fortunately for Obama, he had a Congress completely in Democratic control at the time. The stimulus plan passed the House without a single Republican vote and squeaked through the Senate courtesy of three Republican defections. When Obama signed the measure, the Republican House minority leader bashed it as 'a hodgepodge of government spending.'
He was of course correct: Obama’s stimulus plan was a significant intervention from the federal government, and it added onto the already heaping pile of national debt. But Trump’s plan, assuming it goes through, is no less expensive and is highly unlikely to be paid back by spending cuts later on. In fact, whereas Obama’s stimulus was designed to put people back to work, Trump’s is very literally a cash giveaway directly to the American citizen. If this isn’t anathema to conservative economics, I don’t know what is.
None of this is to suggest that a stimulus isn’t necessary or that posting checks into the mailboxes of Americans isn't the most efficient way of providing some relief to those hurting from this virus. President Trump clearly has to do something to stave off an economic disaster. And with the general election campaign quickly approaching, he doesn’t need any urgency to take some type of bold action.
What it does suggest, however, is that national crises and the intense pressure they place on the country are about as powerful on the economic and political system as a five-category hurricane is on beachfront property. A crisis can often turn the most ideological politician into a pragmatist.
Some of those in the pundit class will castigate the evolution as selling out one’s principles. Policymakers and lawmakers, however, don’t have the luxury of being absolutists during times of stress.