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The economic devastation caused by the coronavirus pandemic has left many wondering what’s ahead for Americans if federal, state, and local officials don’t soon begin taking steps to reopen the economy. Businesses of all sizes have taken drastic steps and, unfortunately, had to make tough decisions to furlough or layoff workers.
Just weeks ago, the economy was strong, with a 3.5 percent unemployment rate. Over the past three weeks, jobless claims have soared by nearly 17 million. Sadly, the hemorrhaging isn’t over. Undoubtedly, America is already in a recession, but we may soon be teetering on the edge of depression if we aren’t already. This isn’t because of some moral hazard in the economy, such as financial institutions making risky mortgage loans. The economic devastation has been self-induced in response to the pandemic, and we were all caught flat footed by it.
Of course, Congress has already responded with three separate bills, most recently the $2.2 trillion Cares Act, which, among its many provisions, included direct payments to Americans below certain income thresholds, guaranteed loans with very generous loan forgiveness provisions to small businesses, and loans to large businesses. But Congress can and should take other steps to help businesses that don’t involve spending incredibly large sums of money.
Two steps immediately come to mind. The first is a business liability shield to protect businesses that take reasonable steps to ensure the safety of employees. In the aftermath of the September 11 terrorist attacks, Congress passed the SafetyAct, which was included in the Homeland Security Act of 2002. The Safety Act allows the Secretary of Homeland Security to designate immunity from lawsuits to those who develop antiterrorism technology.
Although the process by which a developer of a designated technology is too bureaucratic for these circumstances, the Safety Act is at least a precedent during the recovery from a crisis. Congress should lean on the precedent now. Business owners who will, hopefully, soon be re-opening their establishments need a measure of protection. A liability shield for businesses that take certain protective measures, to the extent practicable, for employees. This could include reasonable safety measures taken by businesses to qualify for the shield, such as sanitizing the workplace, practicing social distancing, and temperature checks.
A lawsuit could have a crippling effect on business owners already struggling to pick up the pieces and salvage what’s left when they resume their operations. Businesses, particularly small ones, don’t have massive profit margins. “The typical, median firm has a profit margin of only 6.5 percent,” economist Mark Perry explains. “If they’re not operating efficiently and watching costs very carefully, it’s pretty easy for a business to go from a 6.5 percent profit margin to a 0 percent break-even situation, and then to losses and bankruptcy.”
Just like politicians who, in the words of former Obama White House chief of staff Rahm Emanuel, will never let a crisis go to waste, there are some in society who will use the coronavirus as cover to try to litigate large sums from business owners who are desperately trying to survive. Protecting businesses through a liability shield will be critical to economic recovery.
The second step is providing a holiday from the capital gains tax. Americans’ retirement accounts have taken a hit in recent weeks. Again, this isn’t because of moral hazard in the economy. The pandemic caused massive sell-offs on the stock market. Although the stock market has rebounded in recent days, Congress should encourage more investment.
A capital gains tax holiday for stocks purchased during the crisis and in its immediate aftermath. This will incentivize more investment in stocks and, in turn, help Americans’ retirement accounts recover from the losses they saw as a result of the coronavirus induced panic and supply businesses with the necessary capital to expand.
Congress can provide a stable path for businesses to help the economy recover and recover quickly. These ideas may be unpopular to those who thrive on demonizing business and investment, but continuing to spend money we don’t have only increases the likelihood of economic stagnation and less opportunity for Americans. If we hope to right the economic ship and begin to recover, we must soon reopen the economy and encourage businesses to put the pieces back together.
Jason Pye is the vice president for legislative affairs with FreedomWorks.