By Kevin D. Williamson
Thursday, April 09, 2020
The bad news about the economy is very bad: 17 million unemployment
claims in three weeks, an economy expected to contract at an annualized rate of
35 percent — or more — with businesses small and large struggling or already
gone under.
The good news is, this is exactly the kind of problem you
can just throw money at and expect pretty good results.
An epidemic is not a meteor or a war. We are not going to
have to rebuild big chunks of Manhattan and Washington, as we did after 9/11 —
or have to help rebuild Europe, as we did at the end of World War II. The factories,
shops, houses, trucks, office buildings, machinery, inventory, etc., are still
there, ready to go. There is more to the economy than physical capital, but the
physical capital is simply on ice, not gone up in flames, and that is
important.
What does this mean?
For one thing, it means that cash is king — as cash
usually is. For service-oriented businesses (and for millions of workers)
income lost today is income lost forever — it is not as though Hilton can
stockpile all those vacancies at its hotels for future use. But the story is
different for durable goods, real estate, and much else. If you are a car
dealership, then there is still a pretty good chance that you are going to sell
a lot of that inventory that you would have sold in past weeks but haven’t and currently
are sitting on.
But it will be a buyer’s market. Everything is going to
be on sale, which means that there will be a wealth transfer from pressured
sellers to buyers who have cash on hand. There’s nothing wrong with that. It’s
always a good time to buy a house or a car if you’re rich — if you’re not, the
timing matters more. When the real-estate markets crashed during the financial
crisis, investors with ready money made billions of dollars buying up perfectly
good properties temporarily marked down because of factors that had nothing to
do with the quality of the asset itself or its likely long-term prospects. The
same thing will, barring some deeper and broader economic calamity, happen in
this recovery.
But that dynamic does not benefit only the fat cats with
deep pockets. Businesses that have lost revenue to the epidemic but are otherwise
healthy are going to have great opportunities to renegotiate leases, acquire
new space and equipment, and invest in future growth. If you’ve always wanted
to start your own business, now may be — counterintuitive as it may seem —
exactly the right time to make a move. Washington can help by making it easy to
access certain kinds of commercial financing, and municipalities can do
themselves a favor by taking a much more flexible approach to planning and
zoning, loosening up unnecessarily cumbrous business regulations, and perhaps
offering tax holidays for certain kinds of investments made during the early
recovery period.
More immediately, government can continue to mitigate the
damage being wrought by this unexpected suspension of economic activity through
the most direct means: sending people checks, especially in the form of
extended unemployment benefits. Cash is king in the household economy, too. Of
all the schemes that government has and will come up with in response to the
economic devastation of the epidemic, simply sending people money will be, in
most cases, the best and most effective measure.
There are going to be disruptions and disturbances that
cannot be repaired. These already are well under way, with employers having to
make difficult decisions to dismiss employees, firms unable to pay vendors and
honor contracts, etc. And, of course, some workers are not coming back, because
they will be among the thousands and thousands of dead. But the damage we are
going to experience is going to be mainly organizational
damage — most of the people and the capital will be there when the sun comes up
again, but the firms and relationships that organized these resources into
productive enterprises will, in many cases, fail entirely or become so damaged
that they are unable to make a full recovery. That is the kind of damage that
the “stimulus” measures and employee-maintenance programs are really intended
to soften. This is really the aim — and the wisdom — of efforts such as
Denmark’s attempt to “freeze” its economy, which is to say, to provide enough
short-term support in the form of cash that people and businesses are actually
able to go back to normal when the time comes.
What we want is to minimize the disruption that will
stand between these assets and the people who can make the most of them,
bringing them back online in the most effective way. That should be the guiding
principle of the entire recovery effort.
Americans have not forgotten how to make, do, or sell
things. We are going to be okay. We are sidelined for reasons that are more
than economic — but economic, too: A more severe medical outcome would inflict
much more severe economic damage, and it would inflict it for longer. We are
not helpless. We are taking a hit right now because we are doing, for the most
part, the right thing and the smart thing.
We are going to be ready to go when it is time to go.
And our business leaders already have been doing some
very important things: Those rent holidays many commercial landlords are offering
are partly done in a spirit of generosity, but there is a strong element of
self-interest there, too: It is difficult and expensive to recruit good new
tenants, and demand right now is pretty low, so it doesn’t make much sense to
chase out a formerly reliable business whose operation is mothballed by the
epidemic. From auto-insurance companies rebating premiums (claims are radically
down, because nobody is driving) to utilities and telecoms waiving late fees,
there has been a surprising level of enlightened self-interest on the part of
businesses that understand that it is more important to maintain those
customers and relationships for tomorrow than to nickel-and-dime them today.
Of course, we have to think about those who are suffering
in the here and now. But our economic prospects are, strange as it may sound to
say it, pretty good — this is a catastrophe, but it is not one that is economic
in origin. There is still much that is in need of reform, and we eventually are
going to have to get our national finances in order. And that means, among
other things, resisting the inevitable push to convert present emergency
measures into permanent entitlements. We probably are going to need to have an
unpleasant conversation about revenue in the near future. Those are real
challenges.
But this does not have to be the Great Depression. It
doesn’t have to be an existential economic crisis, and we should be careful not
to make it into one.
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