A day after the 7% dive in U.S. stock markets on Monday, the White House proposed policies that could address the growing negative economic impact of the spreading coronavirus and stocks rallied.
Major stock indexes gained 5% on Tuesday, offsetting much, though not all, of Monday’s big losses.
No decisions have been made yet on what stimulus plans to implement to offset the broad economic effects of the virus. The White House held a meeting with congressional Republicans on Tuesday and suggested a payroll tax cut, which was met with skepticism by Democrats and Republicans, as well as financial help for airlines, cruise lines and the hotel industry.
“With the Federal Reserve running out of options to help, the onus on lawmakers to provide fiscal stimulus — deficit-financed temporary tax cuts and government spending increases — is intensifying,” writes Mark Zandi, chief economist at Moody’s Analytics, in a new report.
Zandi is not opposed to a payroll tax holiday, and he supports tax rebate checks and expanded unemployment insurance benefits, more funding for the food stamp program, and easier loan terms and loan guarantees for small businesses via the Small Business Administration and the Export-Import Bank.
“The $8.5 billion emergency spending package passed at the beginning of March to pay for the costs of responding to the crisis is just a start,” writes Zandi. “Most immediately, the federal government must provide financial support to those Americans who get sick, need to care for those that do, and cannot work because their job sites are disrupted or their children are unable to go to school and daycare.”