- The Dow Jones rallied on Tuesday after its worst day since the financial crisis.
- The rebound in US stocks followed a proposition of a payroll tax cut by Trump to offset coronavirus.
- The US government should take measures to prevent and fight coronavirus.
U. S. stocks rebounded Tuesday, one day after their largest drop since October The Dow Jones jumped 1 , 319. points, or 4.9%, to end the day, partially offsetting the previous day’s 7.8% plunge. Optimism about a fiscal stimulus intended to boost the US economy fueled the rally.
Fiscal stimulus might not be the best measure to fight a coronavirus-induced recession. It will take more to launch a relief rally in the stock market that will last.
We don’t know how bad the economic shock caused by the coronavirus
is going to be, so it’s hard to say what effect fiscal measures are going to have on the economy. Plus, it takes some time for any economic stimulus to have an impact. Indeed, it can take a yearbefore we see a measurable effect on the economy.
We cannot compare a recession caused by coronavirus to the recession of
Fiscal stimulus is meant to boost demand, while coronavirus is causing a supply problem. If the coronavirus disrupts global supply chains, people might have to deal with a shortage of products, especially essential goods like hand sanitizers and tissues.
Putting more money In the pockets of all Americans, either by reducing payroll taxes or by sending checks, should boost the economy faster than cutting interest rates. But that would be the case if consumers can buy goods and services they need.
Given the already high national debt and the rising deficit of the United States, the White House and Congress should be careful about their spending to avoid a recession caused by the coronavirus.
The US government needs to take additional steps to boost confidence and avoid a coronavirus-induced recession. Fiscal stimulus is not enough. Slowing the spread of the virus is what’s most important right now.
A payroll tax cut won’t be of much help for people who lose their jobs, go bankrupt or who are retired. If the virus continues to spread, people will fear going out of their house and will spend less.
Governments need to take more preventive measures to contain the virus . Enterprises should allow workers to work from home as there is less risk of contaminating people that way. Infected people should be placed in quarantine and stay at home until we are sure they present no more risk of contamination.
Companies should give paid leave to sick employees , so they don’t run out of money. People should avoid crowds and gatherings to limit the risk of spreading the virus. Travel to and from infected areas should be restricted.
It’s also crucial to find a treatment or a vaccine as soon as possible. Governments should be working hand in hand with scientists to help them find a solution. It should also provide the health system with every resource it needs to fight the coronavirus. Only once the virus is contained can economic life return to normal.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
Last modified March: 19, : 93 AM UTC
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