In a recently published op-ed by assistant professor of public health, Bhavneet Walia share insights on economic recovery in light of the coronavirus pandemic. “As we are doing our part and following public health guidelines to protect not only our families but also our neighbors and fellow world citizens at a global level, there is also a need to understand and do our part toward economic recovery. As we all fight this battle against a mostly unknown virus, we are wondering how and when the economic recovery will start.” Fortunately, Walia says, past economic struggles and challenging times have taught us lessons that can possibly bring us some relief. Professor Walia’s areas of specialization include health economics and health econometrics.
In our current health crisis, consumers are staying at home and not spending as much money as they normally do in a non-pandemic and expanding economy. Either they do not have a lot of money, or they are uncertain about their future financial situation and hence are saving at a higher rate. Producers are not producing at regular levels for two reasons: their shops are shut down, and consumers have gone into saving mode.
The government is still buying and selling, but at a slower rate in many respects because of the shutdown. The government is delivering policies that it hopes will make the economic recovery smoother and faster once the public health crisis slows down. The highest-impact policy as of now made by the government is the stimulus checks sent to a large swath of the population. When consumers are worried about their future financial situations, they save at a higher rate and do not spend money. Stimulus checks are a way for the government to encourage individuals to spend money in the economy without dipping into their savings.
If individuals spend their stimulus check to buy necessities and put money back into the economy, this will lead to more production and higher employment. Thus, the stimulus funds will promote economic recovery. However, if the beneficiaries of the stimulus money do not spend and instead save it, economic recovery will be slower.