Donald Trump, President Trump, FED discussed on What Next | Daily News and Analysis
When markets get wobbly. The federal government has got a few tools to try to study the situation. The Fed can cut interest rates which it did last week looking at that market selloff today. It's clear more needs to happen. What are other options? Because that has historically been the go-to option slash interest rates. Get people to keep investing. Let's keep this thing motoring along. Yeah so traditionally cutting interest rates is is a is go to move for stabilizing the economy. The another classic tactic is to do some stimulus. Spending right let's Go Go build a bridge. Go fix a road the challenge here is that a lot of the traditional tools that the government uses to steady the economy in the event of recession or downturn or when things just look shaky Might not work the way. They typically do might not work as well as usual here. What do you mean by that? So at and this is one of the things that's been kind of underpinning a lot of people's fears about the pandemic is that you know you can try to lower interest rates and try to get companies to borrow an invest more. You do some public works. Hire a bunch of workers to fix Bill Bridge Rehab some schools. None of that really fixes the core problem. Which or the core problems I should say. Which is you have a virus. That is keeping people at home because they are afraid to get sick right like they have to stay quarantined. It's not like they. You know they. A lot of people are not going to spend not because they don't have money but because they can't they can't go out. They can't live their normal lives Things have to be cancelled. Disneyland has to has to shut its doors. They can't go on vacation where they were nearly would because the you know the occasion destination isn't open And so you know again there are it just. It means that some of the tools that would be very effective when people are reeling from housing bust. are not necessarily going to be as effective when you're trying to deal with a pandemic that doesn't mean you can't help the situation by putting money in people's pockets But you're maybe treading water. It's it's just that in the end. There's you know you can't necessarily get at the core problem you just. You can't stimulate your way out of the core problem. It's not a purely economic issue. In the end it is a public health. Issue the government's response to this pandemic it's been messy with testing for the virus delayed. Congress did move to free up billions of dollars for a medical response last week but economic response seems to be coming together only now. Initially the White House seemed like it just wanted to rely on the Fed that it was it just wanted the Fed cut interest rates and that was the extent of what it was interested in. Some people on the hill are talking about tax relief Which seems a little bit unless you're actually putting money directly into people's pockets like cash immediately tax relief does not seem like the best way to go about it especially since some people are are just not going to be earning money. Part of the problem here is that. Republicans have traditionally been skeptical about The effect of direct fiscal stimulus. Right like dating back to the Obama Administration even though they're willing to run deficits and they have been during the the the trump administration they they still seems. Just like. Don't trust the idea of of Government stimulus because it suggests a big government might work and so I I think that's that's part of the big question. Mark here is how is a Republican administration and a half Republican Congress. Going to go about trying to right the economy when it's on the verge of being or keep the economy upright when it's on the verge of being toppled at a press conference last night. The president talked about the kind of stimulus. He wants to invest in just a payroll tax cut for businesses support for the airline and cruise industry and money for paid sick leave for workers who get the virus. Then trump talked about what a good job is administration has done so far. This was something that we were thrown into. And we're GONNA handle it and we have been handling it very well. The big decision was early when we shut down our borders with the first ones ever to do that. We've never done that in our country before looking at the president's response to the market crash today it the main response seems to be to just try to calm. People down like one of his tweets was so thirty seven. Thousand Americans died from the common flu which is obviously way more than we we know have died from this corona virus. And he ends with think about that. I mean one of our colleagues looked at these tweets and set in slack. I don't think the president understands that. From the market's perspective. He is the problem. Do you agree with that? I mean that's that's certainly part of it in a way this is. This is a throwback to two thousand eight when Lehman collapsed. Right you know. The president was kind of coming out to make his his announcement about or like what the plan was I. I was an intern at the Washington Post. And we. We all gathered around the TV and this one reporter went over. It's like the Bloomberg terminal that we had to to watch how the market would react and literally as George Bush opened his mouth. The market just started falling right like it was just like it was like. Oh yeah this is our president. You Know Oh God. What are we going to do here? We're back to that. There is the man in the Oval Office is not in charge and his his occasional attempts to downplay the severity. This almost certainly going to make things worse rather than better Is that a trump problem or something else. I mean you said it happened with George W Bush so just want to tease it out a little bit of a problem. When you have a guy in the Oval Office who people don't think he's competent right like that's the bottom line is like when a crisis hits you want someone in charge who people believe is competent in two thousand eight. It ended up that the response to the financial crisis was conducted almost entirely by Hank Paulson the treasury secretary then Banenky You know the chair of the Federal Reserve Tim. Geithner was involved. He was at the New York Fed. Then it was up to them to save the world. It's a little bit like we're back in that situation now whereas instead of George W Bush who is at least trying to say the right things where he could we have donald trump. Who's just not even remotely attempting to do what people expect of him instead. It's it's the the responsibility is not just devolved down to the vice president and the rest of the administration. They're actually fighting. You know they're actually at all it's the guy at the top. It's not a. It's not a good leadership. Setup literally went down trump says nothing to worry about the end of the CD says. Is there something to worry about? Donald Trump says. Oh we've got all if you if you WANNA test. You can have a test and Mike Pence has to go in front of cameras and say well actually. We don't anticipate we're going to have enough tests. Initially you know it's it's really stark is their way to right the ship. I mean yeah I mean maybe maybe Donald Trump's openness to just spending money to fix the problem. We'll we'll help you know. He doesn't really care much about deficits. I don't think he has some ideological attachment to how you stimulate. The economy just wants economy fixed. So maybe that will actually aid things a bit since he doesn't have firm ideas about in a big government or whatnot. Maybe this maybe Mike Pence will pull rabbit out of his hat and somehow managed to start You know containing this the this outbreak. I don't have a lot of faith in that. But maybe it'll happen. There are possibilities You know I again. I'm not I'm not confident but something could go right. It was a Jordan Weisman plan. What would it be? I mean okay. Purely on the economic end one one idea I have kicked around. And this isn't a really firm one but would-be just to allow people to claim unemployment insurance for instance for time that their business was shut down or that They couldn't go to work because they were in quarantine even if they even if they weren't technically fired. I mean another thing would just be to guarantee paid sick leave but You know you'd also need to support businesses a little bit there too. I think We'll say though is we have automatic stabilisers. We have programs like food stamps and unemployment that are meant to kick in when the economy gets worse and that sort of a version of putting money in people's pockets right. That's that's what you're actively doing and so one one response here might be to just kind of doubled down on those programs so yeah I think I kind of lean on automatic stabilisers. I would try to figure out a way to to get money automatically directly into people's.