What’s Going On Here?According to reports this week, the US government is considering a raft of economy-stimulating – potentially even economy-saving – measures to bring it back from the brink. What Does This Mean?One mooted proposal is tax cuts, which should give cash-strapped workers more money to spend. If that sounds familiar, it might be because the government did just that back in 2017. And they did boost the economy as hoped, though the US wasn’t exactly struggling with a coronavirus-induced wheeze at the time.
Also reportedly on the government’s docket are loans for small businesses, as well as support for workers with no paid sick leave – the risk being that infected employees will feel pressured into working and spread the virus further. Large businesses will be hoping they’ll benefit next, with shares of airlines having fallen 34%, resorts and cruise companies 43%, and hotels and restaurants 27% since the outbreak (tweet this). Why Should I Care?For you personally: Small mercies.
A clear benefit of tax cuts is that it’ll put more money in your pocket (as long as you, y’know, live in the States). The government’s likely expecting the move will encourage you to up your spending, which should partly offset the slowdown in economic growth that’s likely to accompany coronavirus. And if you’re staying indoors, that could give ecommerce retailers and on-demand services a shot in the arm – which means you might be tempted to “buy the dip” while stocks are on the cheaper side.
The bigger picture: We don’t do politics, but…
Much like the US Federal Reserve’s emergency interest rate cut last week, some economists are skeptical tax cuts will solve the real problem: supply. Remember, businesses are pausing production and shutting stores primarily because their workforce is absent or at risk, not because there are no customers. Given the upcoming US presidential election, then, the more cynical among you might see the government’s decision as somewhat politically motivated… | 