Wharton professor Jeremy Siegel said Thursday that the federal government should consider dramatic measures to support the economy during the coronavirus outbreak, including a $2,000 tax credit for individuals and a fund to backstop lines of credit for companies.
Equity markets plunged again on Thursday, with all three major U.S. stock indexes trading more than 20% below their recent highs. President Donald Trump said Wednesday night that the government was restricting travel between the U.S. and Europe and that he would ask Congress for economic relief measures domestically.
Siegel said that a relief program should include a fund that would allow banks to ensure that they could meet the liquidity needs of companies drawing on credit lines.
"The idea we're assuring the financial health to keep businesses going. Now, if we have 60 days, 90 days, 120 days of cessation, how many businesses would need to go on a line of credit? If that is assured, they will survive when confidence gets back and the economy gets back," Siegel said.
The professor said that he didn't think the help from the government should extend to supporting companies that are struggling for reasons other than the virus, such as the energy industry, where a global price war on oil has combined with weakening demand due to the virus to drive prices lower.
"I'm not for really bailing those out because I don't think they're systemic to the health of the economy. That's a macroeconomic force on oil that needs to be corrected," Siegel said. "We're talking about good businesses that are not going to get revenue for three months, four months, whatever time it is, because of the virus ... Those are the ones that we have to make sure that it's because of the virus alone that their existence and employment of tens of millions of people is note going to be threatened."
The professor said the crisis was not at the same level as the financial crisis and that the economy could bounce back faster from a recession.
He also said that strong actions by the government to support the economy could allow policymakers to focus on the health care side of combating the virus.
"Once you take those off the table ... then we can all concentrate on the health measures that we all need to engage in now," Siegel said.