ECONOMIC HIT FROM COVID-19

ECONOMISTS COMPARE EFFECTS OF CORONAVIRUS CRISIS TO IMPACT OF NATIONAL DISASTERS, SAYS NYMAG’S JOSH BARRO 

BARRO ADDS MOST IMPORTANT THING GOVERNMENT CAN DO FOR ECONOMY IS FIGHT COVID-19 SUCCESSFULLY 

SAYS PEOPLE NEED TO FEEL BAILOUTS ARE FAIR; POLICYMAKERS MUST ALSO ACT WITH SPEED AND MAKE RESPONSE LARGE ENOUGH

Millions are facing unemployment and businesses are in a steep decline. The disruption and turmoil caused by the coronavirus has impacted our personal lives, our professional lives and the future of the economy. But from the stock market to individual jobs to the world banking situation, where are we headed? What is the prognosis? And how will we get past this? New York Magazine Business Columnist Josh Barro says the government has a very important role to play in terms of making sure the safety net holds for Americans. He joins us.

Aired on March 24, 2020. 

TRANSCRIPT

WELCOME TO 'METROFOCUS,' I'M JACK FORD.

AS WITH MANY OF YOU OUT THERE, WORKING FROM HOME TODAY.

TAKING A DIFFERENT LOOK AT SOME OF THE SIGNIFICANT ISSUES THAT ARE IMPACTING US FROM A DIFFERENT VENUE.

WE AT 'METROFOCUS' WANT TO MAKE SURE EVEN WITH THE DISRUPTION AND TURMOIL WE'RE EXPERIENCING, WE'RE PROVIDING YOU MOST IMPORTANT INFORMATION.

DISRUPTION AND TURMOIL, IMPACT ON PERSONAL LIVES, PROFESSIONAL LIVES AND AS WE'RE SEEING ON THE ECONOMY.

STOCK MARKET TO INDIVIDUAL JOBS TO THE FEDERAL GOVERNMENT TO THE WORLD BANKING SITUATION.

WHERE ARE WE GOING WITH ALL THAT?

WHAT ARE THE PROBLEMS AND HOW ARE WE GOING TO GET PAST THIS ON WHAT MAY BE OUR NEW NORMAL REALITY.

JOINING US NOW, JOSH BARROW, BUSINESS COLUMNIST, HOST OF KCRW's 'LEFT, RIGHT AND CENTER,' GOING TO LOOK FOR ANSWERS TODAY.

ALL RIGHT.

LOOK AT COUPLE OF DIFFERENT THINGS THAT YOU'VE BEEN TALKING ABOUT.

LET'S START WITH THE STOCK MARKET.

HEADLINES EVERY DAY, UP, DOWN, VERTIGO INDUCING WHAT WE'RE SEEING WITH THE STOCK MARKET.

WHY IS THE STOCK MARKET ITSELF AND ITS PERFORMANCE SO IMPORTANT IN THE MIDST OF A CRISIS SUCH AS THIS?

FOR TWO REASONS.

ONE, IT AFFECTS A LOT OF INDIVIDUALS WHO OWN STOCKS.

TO THE HALF THAT DON'T OWN STOCKS, HALF DO.

IT'S IMPORTANT FOR PEOPLE'S FINANCIAL CONDITION, COUNTING ON THIS FOR RETIREMENT.

AND WHEN YOU HAVE A DROP LIKE THIS, NORTH OF 30%, STARTS TO RE-EVALUATE WHAT THEIR WEALTH ALLOWS THEM TO DO.

BUT STOCK MARKET HAS BEEN INDICATOR OF THE ECONOMY, OUTLOOK FOR THE ECONOMY AND INDICATOR HOW BAD THIS PANDEMIC IS LIKELY TO DISRUPT SOCIETY.

PEOPLE HAVE BEEN TRYING TO FIGURE OUT HOW SERIOUSLY TO TAKE THIS, FINALLY SETTLED ON VERY, VERY SERIOUSLY.

BUT MARKETS, PUBLIC CONVERSATIONS IN LATE JANUARY, EARLY FEBRUARY, SORT OF A SENSE MAYBE THIS WILL BE LIMITED TO CHINA MOSTLY.

THAT MATTERED TO STOCK MARKET BECAUSE CHINESE ECONOMY, IF COMPANY RELIED ON SUPPLY CHAIN OUT OF CHINA, AN EFFECT THERE.

BUT MOSTLY LOOKED NOT THAT IMPORTANT TO THE U.S. ECONOMIC.

ONCE PEOPLE REALIZED THIS WAS GOING TO BE A GLOBAL PANDEMIC THAT CAUSES DEATH AND DESTRUCTION ALL OVER THE WORLD, STARTED TO TANK STOCK MARKETS ALL OVER THE WORLD.

GOING TO AFFECT BUSINESS PERFORMANCES AND HAS IMPACTS FOR INDIVIDUALS.

ALL THE PEOPLE GETTING LAID OFF NOW WHO WORK IN RESTAURANTS AND HOTELS.

AIRLINES AROUND THE WORLD AND U.S. DOING INVOLUNTARY FURLOUGHS OF EMPLOYEES WITH LESS FLYING.

SEEING INVESTORS SAYING WE THINK PROFITS ARE GOING TO BE LESS THAN EXPECTED, COMPANIES EMPLOYING FEWER PEOPLE, FEWER CUSTOMERS, BIG CHANGES FOR ALL OF US, EVEN IF WE DON'T OWN STOCKS.

THE VOLATILITY, IS THAT SOMETHING WE SHOULD BE SURPRISED ABOUT OR SOMETHING YOU MIGHT HAVE EXPECTED GIVEN THE WHIPSAW EFFECT WE'VE HAD IN TERMS OF NEWS AROUND THE WORLD?

THE VOLATILITY MAKES SENSE TO ME.

IT IS SO HARD TO FIGURE OUT HOW BIG THIS THING IS GOING TO BE, HOW MUCH IT'S GOING TO AFFECT EVERYTHING, INCLUDING BUSINESS.

SO STOCK PRICES SHOULD BE STABLE WHEN IT'S PRETTY CLEAR TO PEOPLE WHAT THE LONG RUN FINANCIAL PICTURE IS FOR COMPANIES.

THEY HAVE A PRETTY GOOD IDEA WHAT KIND OF PROFIT A COMPANY IS GOING TO MAKE LONG-TERM.

THAT'S WHAT STOCK PRICE IS, PRESENT VALUE OF FUTURE PROFITS.

NOW THE OUTLOOK IS UNCERTAIN.

DON'T KNOW IF THE SHUTDOWNS ARE A FEW WEEKS, A FEW MONTHS, WHICH REGIONS OF THE WORLD -- NOW LOOKING AT ESSENTIALLY ALL THE UNITED STATES BUT HAVE BEEN QUESTIONS ABOUT GEOGRAPHY AND DURATION.

NOT JUST BECAUSE LOSING OUT ON THREE MONTHS OF BUSINESS IS WORSE THAN ONE MONTH, BUT THEY BECOME HARDER TO COME BACK FROM.

TALKING TO ECONOMISTS, FIRST ANALOGY IS NATURAL DISASTER.

RECOVERING FROM HURRICANE, EARTHQUAKE, THAT SORT OF THING.

AND RECOVERIES OUT OF ECONOMIC RECESSIONS CAUSED BY NATURAL DISASTERS TEND TO BE FAST.

PEOPLE GO BACK TO WHAT THEY WERE DOING BEFORE AND ECONOMY GOES BACK TO NORMAL FASTER THAN FINANCIAL CRISIS LIKE 2008.

THAT ASSUMES A QUICK TURNAROUND, COUPLE OF WEEKS OF CLOSURE DUE TO STORM.

LONGER IT GOES, HARDER TO TURN THE LIGHTS ON.

CLOSE FOR THREE WEEKS AND REOPEN RESTAURANT, CAN BRING BACK ALL THE SAME EMPLOYEES.

CLOSE FOR MONTHS, LOT OF THEM GO DO SOMETHING ELSE AND YOU'RE MORE LIKELY -- GOING TO BE A LOT OF AWKWARD CONVERSATIONS BETWEEN BUSINESS OWNERS AND LANDLORDS.

RESTAURANT OWNERS NOT ABLE TO PAY RENT.

I THINK THE LANDLORDS WILL REALIZE THEY'RE BEST OFF LETTING THEM STAY BECAUSE NOT GOING TO FIND NEW TENANT NOW.

BUT NOT ALL GOING TO MAKE THOSE DECISIONS AND LANDLORD HAS TO HAVE CONVERSATIONS WITH LENDERS.

IF HE'S NOT GETTING RENT, CAN HE PAY HIS LENDERS?

I THINK THAT'S SOMETHING ALSO WEIGHING ON STOCK MARKETS.

A LOT OF PEOPLE IN THE BEGINNING THOUGHT STOCK MARKET YOU'RE GOING TO SEE TRANSPORTATION INDUSTRY HIT, HOSPITALITY INDUSTRY HIT.

BUT AS YOU LOOK AT LONG RANGE SCENARIO, BEST WE CAN TELL -- WE DON'T KNOW HOW LONG OR SHORT THE LONG RANGE MIGHT BE, BUT SHOULD BE BE CONCERNED ABOUT OTHER SECTORS OF THE ECONOMY?

WITH A STOCK MARKET DECLINE THIS BIG, NO SURPRISE IT'S ENTIRE ECONOMY, SOME SECTORS HURT MORE THAN OTHERS.

TRANSPORTATION, HOSPITALITY, ENERGY ALSO HIT HARD BECAUSE OIL PRICES HAVE FALLEN SHARPLY.

PARTLY BECAUSE OF THE CRISIS LESS DEMAND AND PARTLY BECAUSE FIGHT BETWEEN THE SAUDIS AND RUSSIANS RAMPING UP PRODUCTION INSTEAD OF STEPPING DOWN IN TIME OF CRISIS.

BUT ALMOST ENTIRE ECONOMY, COMPANIES' STOCK PRICES ARE FALLING.

A FEW EXCEPTIONS, COMPANIES THAT WILL GET BUSINESS FROM THIS.

PHARMACEUTICAL COMPANY THAT MAKES ANTIVIRAL DRUGS, STOCK MAY BE UP.

SOME SECTORS HOLDING UP, CONSUMER ESSENTIALS LIKE WALMART, NOT GOING TO RESTAURANTS BUT STILL SHOPPING, MAYBE EVEN BUYING MORE GROCERIES.

CLOROX HAS BEEN A STRONG PERFORMER BECAUSE BUYING A LOT OF DISINFECTING GOODS.

BUT OVERALL BAD FOR ENTIRE ECONOMY BECAUSE OF THE KNOCKOFF EFFECTS.

NOT GOING TO WORK, NOT EARNING PAYCHECKS, NOT SPENDING MONEY ON THINGS.

EVEN IN SECTORS THAT PEOPLE CAN CONTINUE WORKING.

THE FEDERAL GOVERNMENT, WHAT THEY'VE ATTEMPTED TO DO, WHAT YOU THINK THEY CAN DO IN TERMS OF HAVING IMPACT ON THIS.

WE'VE SEEN PROCLAMATIONS AND REDUCTION IN INTEREST RATES AND VARIOUS IDEAS ABOUT FISCAL POLICY.

LET'S START OFF FIRST WITH WHAT SORT OF WEAPONS, IF YOU WILL, GENERALLY SPEAKING, WOULD THE GOVERNMENT HAVE TO SOMEHOW JUMP IN AND ASSUAGE THE ECONOMY PROBLEMS HERE?

GIVEN THE UNDERLYING CRISIS WE'RE DEALING WITH.

MOST IMPORTANT THING THE GOVERNMENT CAN DO TO SUPPORT THE ECONOMY AND BUSINESS IS FIGHT THE VIRAL INFECTION SUCCESSFULLY.

MORE THEY CAN SHORTEN THE DURATION AND REDUCE NUMBER OF PEOPLE DYING OR SERIOUSLY ILL BECAUSE OF THIS, MORE QUICKLY ABLE TO STOP THE SPREAD AND CAN GO BACK TO SOMETHING LIKE NORMAL LIFE, BETTER FOR THE ECONOMY.

THAT'S JOB ONE.

MESSAGE PRESIDENT STARTED GETTING OUT EARLIER THIS WEEK, PRIMARY FOCUS.

THERE ARE ROLES FOR OTHER ASPECTS OF GOVERNMENT POLICY.

SHARP INTEREST RATE CUTS, TWO UNSCHEDULED, TAKING SHORT-TERM DOWN TO ZERO.

NORMALLY MAKE IT EASIER FOR CONSUMERS TO CONSUME.

CAN BORROW MORE CHEAPLY AND MAKE IT CHEAPER FOR BUSINESSES TO INVEST BUT RIGHT NOW NOT GOING TO GET PEOPLE TO INVEST.

IF THEY FEEL RICHER, NOT GOING TO SPEND MORE IN RESTAURANTS.

IT WILL SUPPORT THE ECONOMY OUT OF THE CRISIS, TRYING TO SCALE UP AND GO BACK TO WORK, REOPEN BUSINESSES, LOW INTEREST RATES WILL MAKE IT MORE AFFORDABLE.

FED IS SUPPORTING THE FINANCIAL SYSTEM, ENSURE THE AVAILABILITY OF CREDIT TO BUSINESSES THAT DO WANT TO BORROW.

THAT'S IMPORTANT TO PREVENT COLLAPSES IN CONFIDENCE IN THE FINANCIAL SYSTEM THAT CAN CAUSE PROBLEMS IN BUSINESSES THAT SHOULD BE RELATIVELY UNAFFECTED BY THIS.

THERE'S A ROLE FOR FISCAL POLICY.

LOT OF PEOPLE WILL HAVE ACUTE NEEDS.

ENORMOUS NUMBER OF PEOPLE FILED FOR UNEMPLOYMENT THIS WEEK.

WON'T KNOW THE NUMBER UNTIL NEXT WEEK.

NEED FOR ENHANCED UNEMPLOYMENT BENEFITS TO SUPPORT THE ECONOMY WITH PEOPLE OUT OF WORK.

AND SUPPORT FOR OTHER PEOPLE.

PEOPLE NEEDING MEDICAL CARE ARE ABLE TO GET IT AND DON'T HAVE TO WORRY WHETHER THEY CAN PAY FOR IT.

DON'T WANT PEOPLE STAYING AWAY FROM HOSPITAL BECAUSE AFRAID OF A BILL IF THEY SEEK TREATMENT FOR CORONAVIRUS.

AND THEN PHYSICAL MEASURES TO SUPPORT THE BROAD ECONOMY, MOSTLY FOR SUPPORT COMING OUT OF THE CRISIS.

PEOPLE IN WASHINGTON TALKING ABOUT SENDING CHECKS TO INDIVIDUALS, GOING OVER HOW BIG.

MITT ROMNEY SAID $1,000 FOR EVERY ADULT.

SOME DEMOCRATS SAID BIGGER THAN THAT, SOME WANT RESTRICTIONS ON WHO GETS THE CHECKS.

THAT WILL PROTECT BALANCE SHEETS TO SOME EXTENT, PEOPLE WILL GO OUT TO SHOP AFTER THIS IS OVER, LESS FOCUSED ON COVERING THE BILLS THEY HAD NOT WORKING AND MORE ABLE TO SPEND.

BUT NUMBER LIKE $1,000 STARTS TO LOOK SMALL COMPARED TO EXPENSES IF YOU'RE PUT OUT OF WORK.

TALKING ABOUT LARGER AND LARGER NUMBERS BECAUSE THE NEED IS BECOMING CLEARER.

HOW ABOUT COMPARING THIS TO 2008/2009.

IT'S HARD TO MAKE PRECISE COMPARISON.

MORE BANKING CRISIS THAN THIS.

RESENTMENT AT THE TIME FOR BAILOUT OF THE BANKING INSTITUTIONS AND THAT'S CONTINUED IN YEARS SINCE.

THIS IS DIFFERENT.

HOW WOULD YOU COMPARE THE TWO OF THEM IN TERMS OF IMPACT AND MOVING FORWARD?

I MEAN I THINK TO YOUR POINT, THE KEY DIFFERENCE IS THAT WAS A CRISIS THAT STARTED IN THE FINANCIAL SYSTEM.

THIS DID NOT.

THIS IS A REAL WORLD CRISIS CAUSED BY VIRUS BUT MAY HAVE EFFECT IN THE FINANCIAL SYSTEM.

SO IMPORTANT TO PROTECT IT, BUT ONE THING MAY MAKE IT POLITICALLY EASIER THAN 2008, THIS ISN'T ALL BANKERS' FAULT.

DON'T HAVE FEELING THEY CREATED MESS AND NOW WE THROW MONEY AT THEM.

BANKS IN UNITED STATES ARE IN BETTER FINANCIAL POSITION THAN THEY WERE GOING INTO 2008 CRISIS.

LEFT LEVERAGED, THEY HAVE MORE ROOM TO TAKE LOSSES ON LOANS IF BORROWERS CAN'T REPAY.

THAT'S UPSIDE.

FLIP SIDE OF IT, SIMILAR TO 2008, WE'RE GOING TO HAVE TO BAIL OUT A LOT OF BUSINESSES IN ONE WAY OR ANOTHER.

THERE ARE A LOT OF QUESTIONS HOW TO STRUCTURE THE BAILOUTS.

KEY OBJECTIVE IS KEEP BUSINESSES OPERATING TO THE EXTENT IT'S APPROPRIATE TO BE OPERATING AND KEEP PEOPLE GETTING PAID MAYBE EVEN IF NOT OPERATING SO THE ECONOMY CAN GO BACK TO NORMAL QUICKLY AS POSSIBLE.

YOU'LL HAVE ARGUMENTS WHO TAKES THE LOSSES THERE.

AIRLINE EMPLOYEES KEEP GETTING PAID, CAN RESULT IN STOCKS IN AIRLINES GOING TO ZERO, THE EQUITY GETTING OUT.

AIRLINES ARE PUSHING FOR SOLUTIONS THAT WOULDN'T HAPPEN, HAVE A GRANT AND MAYBE WOULDN'T HAVE TO GO BANKRUPT.

COULD BE A LOT OF HARD FEELINGS SIMILAR TO 2008, WE HIT THIS CRISIS AND GOVERNMENT BAILED OUT A BUNCH OF RICH PEOPLE.

IT'S IMPORTANT TO BE MINDFUL OF THAT CONSEQUENCE.

ON THE OTHER HAND I WORRY -- WE NEED ENORMOUS RESPONSE HERE TO THE EXTENT THE POLICY MAKERS ARE BOGGED DOWN IN ARGUMENTS WHAT IS FAIR AND WHO SHOULDN'T BE AFFECTED.

YOU NEED PEOPLE TO HAVE TRUST IN THE GOVERNMENT BUT ALSO ACT WITH SPEED AND LARGE RESPONSE.

TWO IMPULSES MAY BE IN TENSION WITH EACH OTHER.

IT'S COMPLICATED, CONFUSING.

VERTIGO INDUCING, BUT YOU'VE BEEN VERY HELPFUL GIVING US OPPORTUNITY TO UNDERSTAND ALL THIS.

HOPE WE GET YOU BACK ON SOON TO TALK MORE IN DETAIL ABOUT SOME OF THIS.

THANKS FOR JOINING US.

THANKS FOR HAVING ME.

TAKE CARE NOW.

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