In addition to announcing a 30-day ban on Europeans traveling into the U.S. to help curtail the spread of Coronavirus in this country, President Trump announced a series of emergency measures to provide financial assistance to small businesses that are suffering economically because of the seemingly rapid spread of the virus across the nation and the globe.
WASHINGTON, DC – MARCH 11: US President Donald Trump addresses the nation from the Oval Office about … [+]
The president took to the airwaves Wednesday night to outline his response to a virus that has spread across six continents, caused havoc in stock markets around the world, and disrupted life as we know it in the U.S. Among the casualties: postponement of school for students at every level from elementary schools to prestigious universities, cancellation of travel plans, the suspension of the NBA season, and cancellation of St. Patrick’s Day celebrations.
“This is not a financial crisis,” Mr. Trump said. “This is just a temporary moment in time that we will overcome as a nation, and as a world.”
During his speech, President Trump said he will ask Congress to pass legislation that would “ensure that working Americans impacted by the virus can stay home without fear of financial hardship.” Among the proposals:
· Financial aid for workers who are sick, quarantined or caring for family members who are ill;
· Postponement of the IRS’s tax-payment deadline (April 15) for some individuals and businesses; (Trump maintains that pushing back the tax deadline would provide a cash flexibility while businesses are suffering and that the measures would pump $200 billion of liquidity into the economy.)
· Authorization for the Small Business Administration to offer an additional $50 billion in SBA loans at low-interest rates to help small businesses overcome temporary economic setbacks caused by the spread of the Coronavirus.
The effects of the Coronavirus outbreak on small businesses is very real. I see it already. Small businesses are coming to Biz2Credit in search of working capital to cover staff costs because customers are staying home rather than eating in restaurants and attending entertainment events. Related industries that people might not think about — printers who produce marketing materials to promote events, mailing houses, ad sales reps — are all suffering a downturn.
According to CBS Sports, NCAA president Mark Emmert has announced that Division I men’s and women’s basketball tournament games will be played in arenas without fans, and the NBA has suspended season after a Utah Jazz player tested positive for the virus. New York cancelled its St. Patrick’s Day Parade, which dates back to 1762, for the first time in history. The event brings up to two million visitors into the city and millions more in revenue for bars, restaurants, and hotels each year.
The service sector plays an important role in the economy, and the travel, tourism, entertainment, and restaurant industries are all being hit very hard by the impact of Coronavirus.
Manufacturing firms have also been handcuffed by the delays in inventory and raw materials made in China. Without finished products or the materials to make goods, small businesses are unable to generate revenues.
While some of his proposals are good, I believe the president did not go far enough. The $8.3 billion he released for medical research is probably not enough. Although he boasted about the strength of the economy, next month’s Jobs Report will likely be disappointing and unemployment may rise if contract workers and service sector employees, including waiters and bartenders, are laid off. This will likely result in a loss of business optimism and consumer confidence. After all, consumer spending has played a big role in the strength of U.S. economy.
What should President Trump have done?
Firstly, he should have made more specific proposals about what types of businesses would qualify for financial insistence or how much money would be available to them. Markets don’t like uncertainty, and Americans are looking for reassurance from their leader. Providing details on these proposals would have helped alleviate fears and calmed nerves.
If he wanted to do something really bold, he could have proposed a payment moratorium for businesses that are in distress to help them during this rocky financial period. Businesses related to the entertainment industry are suffering right now, and until the virus is contained, things could get worse. For instance, I would not be surprised if movie theaters closed for an extended period of time.
The economy is strong, and he could have proposed a big stimulus package that would prevent small businesses from going under during what is now being called the start of the first Bear Market in more than a decade. Industries, especially airline and cruise industries, may need help. The Fed has done its part by cutting interest rates to help stimulate spending and investment.
In the U.K., Rishi Sunak, the Chancellor of the Exchequer, has made an unprecedented proposal of financial aid in the form of £3,000 cash grants that will benefit 700,000 businesses, according to The Guardian newspaper. Further, the British government will refund the cost of sick pay for up to 14 days, including for those who self-isolate – a measure with a price tag of £2 billion. These proposals are costly, but not as costly as a full-blown economic meltdown would be if small businesses begin to fold.
Britain’s Chancellor of the Exchequer Rishi Sunak views testing of samples for respiratory viruses … [+]
POOL/AFP via Getty Images
Secondly, the President should have conveyed a laser-like focus on containment measures, medical research funding and assistance, and the development of plans for mandatory quarantines, if necessary. While these things are not palatable, they may indeed prove to be necessary in the days ahead. The President had an opportunity to get ahead of these issues with his message, but he did not.
Fortunately, this is not 2008. The fundamentals of the economy, and the banking industry in particular, are strong. However, action must be taken now to prevent an economic meltdown and the loss of the prosperity the country has seen during the past decade of growth during both the Obama and Trump presidencies. For business owners in particular, the coming weeks will prove decisive, either tipping the scales back towards confidence and resilience in the economy, or setting up a difficult time ahead.