The gigantic American aid plan, a minimum in the absence of a social safety net

Washington (hooly News) – The amount is historic and emergency aid is a breath of fresh air for the most vulnerable Americans and businesses. Yet this is the minimum that the United States could do for an economy without a social safety net.

And it will undoubtedly take much more to stimulate the world's first economy decimated by the coronavirus pandemic, experts say after the Senate's approval of an agreement on a gigantic economic plan.

In a country where a multitude of workers benefit from meager unemployment benefits, where pensions depend in part on the financial markets and where the savings rate is very low, the economic recession following the spread of the virus risks precipitating poverty into millions of people.

– "Essential" –

The plan, which has yet to obtain the approval of the House of Representatives with a democratic majority, "is in itself essential to avoid a deeper crisis than what we are currently experiencing", reacted Gregory Daco, chief economist at Oxford Economics.

Because, he says, the immediate challenge is to "avoid a total collapse" of small and medium-sized businesses which now provide more than half of the jobs in the United States.

"For the moment it's enough," opines Alan Stuart Blinder, professor of economics at Princeton University even if given the emergency adoption of a plan of unprecedented scale – more than 2,000 billion dollars and 6,000 billion if we include aid from the Central Bank – "there are bound to be mistakes and omissions".

For the economist, a former adviser under the presidency of Bill Clinton, this plan will act "much more as a stabilizer or even a tourniquet" than as an economic stimulus.

In other words, it will stop the bleeding when more than three million people went to work unemployed last week, unheard of.

Gregory Daco notes in particular the approval of an envelope of 350 billion dollars for interest-free loans intended for small and medium-sized businesses as well as the access to unemployment insurance for a period of four months.

– "Terribly inadequate" –

"I think we will need more incentive in the future," said Alan Blinder, however, while "this horror will highlight something we have always known: the American social safety net is woefully inadequate."

For his part, facing markets in turmoil struggling to be reassured, the President of the American Central Bank Jerome Powell promised Thursday that the institution would continue to lend money "aggressively" to stem the economic impact.

The long-term challenge is to preserve jobs. But for small businesses, loans might not be enough, says Rosemary Taylor, a professor at Tufts University.

"Faced with deep economic uncertainty, many small businesses and businesses may hesitate to take on more debt," she said. "There is a real danger that this epidemic will decimate the main streets of America."

In the absence of social shock absorbers and faced with the specter of a deep recession in the run-up to the presidential elections, Donald Trump did not hide his impatience on Tuesday, hammering out that he wanted to get everyone back to work from here mid-April.

For the time being, more than half of the American population is now confined to their homes to stem the epidemic which has infected nearly 69,210 people and left 1,046 dead, according to the latest report from Johns Hopkins University.

This remedy could have more serious consequences than the virus itself, says the Republican president.

"Not only is it false, but it is also dangerous both for public health – which is obvious – and for the economy," said Alan Blinder.

– Risk of lasting depression –

If there were to be a second wave of infection due to the premature lifting of containment measures, the economic depression would be long-lived this time, warns the economist.

"Everyone would like to go back to work but we cannot revive the economy until the virus is overcome" and as long as people are afraid, insists Gregory Daco.

For Barry Glassner, a retired American sociologist and author of a book entitled "The Culture of Fear", we will have to be pragmatic.

"At some point, schools, parks and businesses will have to reopen," he said. "What we should be discussing is not when to reopen – this is a decision for public health experts – but what rational plan can we put in place to open earlier (…) with relatively little risks and many benefits? "

He observes that closing schools harms many children and can even contribute to the spread of the virus when children are looked after by their grandparents.

On the business side, the smallest can never reopen if they have to stay closed for months.

"So why not authorize the opening of those who can practice social distancing?", He asks.