Outrage Could Endanger the Economy
The United States economy is in free fall, with tens of millions of people unemployed and countless businesses at risk of collapse. Congress has already allocated nearly $3 trillion to contain the crisis, and it is widely understood that it will need to do more.
Yet with stunning speed, the political conversation has pivoted from whatever-it-takes determination toward a different feeling: outrage.
Increasingly, lawmakers, media coverage and ordinary voters are focused not on preventing a potential depression, but on litigating which recipients of federal rescue are morally worthy and which are not.
For many on the political left, that has expressed itself as outrage at big corporations taking advantage of government rescues or cheap credit supplied by the Federal Reserve. On the right, it has included anger at federal government support for state and local governments, and at expanded unemployment insurance benefits supporting the jobless. For the news media, it has meant articles about rescue money going to arguably unworthy organizations like prep schools and steakhouse chains.
In effect, a scramble is underway to define who counts as deserving of a piece of the multi-trillion dollar federal rescues. The risk is that this fuels a sense of scarcity, of zero-sum jockeying. It has the potential to limit the government’s response and suspend help to affected individuals, businesses and governments before the crisis is anywhere close to ending.
“My conservative friends don’t think states and cities deserve help,” said Tony Fratto, who worked in the George W. Bush White House and is now a partner at Hamilton Place Strategies. “My progressive friends think certain businesses don’t deserve help. And my libertarian friends don’t want anyone to get help.”
“These are the seeds of long, slow, painful recoveries,” he said.
In particular, there is an emerging tendency to apply a lens that made more sense in the 2008 global financial crisis and its aftermath: the idea of “moral hazard.” Economists use the term to refer to the bad incentives that are created when people or companies know they will be rescued from their mistakes.
In the last crisis, conservatives complained about mortgage relief for home buyers who had borrowed more than they could afford.
The bank bailouts of that era involved huge moral hazard problems, in that the very financial institutions that had fueled a mortgage bubble were being protected from its full consequences.
But arguments that similar concerns should apply in the COVID-19 crisis are less persuasive.
But that crucial difference — that corporations are victims of the coronavirus, not the cause of it — is ignored by an emerging thread of commentary.
文／Neil Irwin 譯／陳韋廷 核稿／樂慧生