As of today, the number of COVID-19 cases has surpassed more than 2 million people worldwide. The number of deaths is over 130,000. The numbers doubled in about 13 days and are growing continually. Many public health officials fear that the numbers are actually much higher due to the lack of testing in most parts of the world.
The United States is no different in this lack of testing, which has been called one of the greatest failings of the Trump administration’s response. It remains the biggest barrier to getting the country reopened. At this point, public health officials and state and local leaders aren’t the only ones calling for more testing, but so are businesses. This comes as they recognize that in order for the country, and them, to reopen we need to know how many people have been infected and the likelihood of reinfections.
As a result of the economic impacts of the virus, the government has provided assistance to individuals and businesses. This has come in the form of a $2 trillion relief package, which basically replaces only a few months’ worth of our economy and half of what the federal government spent in all of 2019. What most people don’t know is that all of this money is borrowed and it comes from literally nowhere. How is this possible?
The traditional view of economic theory maintains that governments and central banks have distinct responsibilities. The government’s job is to set fiscal policy, like raising money through taxes and borrowing to spend on running the country. The central bank, or Federal Reserve in this case, uses different types of monetary policy, such as buying and selling government securities to change the amount of money in circulation, to help guarantee that the country’s economy operates smoothly. The difference with the relief package, or CARES Act, is that it requires the government to significantly expand its debt at the same time that the Federal Reserve has indicated its preparedness to buy in essence unlimited amount of government debt. This means that the United States has effectively reversed decades of conventional wisdom by putting into policy ideas that were once thought of as the fringes of economics. If needed to pay for the debt, it means that the country would need to actually print the money.