Question

Mention three economic incentives for fiscal policy as a consequence of COVID-19 that apply in Puerto Rico and / or the United States

Answer 1

Introduction: -

The corona virus pandemic has led to an economic crisis in the United States of America like none other we have seen in the last decade or so. The first issue is that it is not a cyclical recession which can simply be corrected by normal economics, but requires long term assessment and structural changes, which may allow for long term recovery in these uncertain conditions.

As establishments remain shut across the country, the overall demand for goods and services is steadily declining and people are only limiting their needs to essential items. The end result of this is that the total demand in the country as well as the gross domestic product which measures the final value of goods and services in the country has fallen sharply.

As the domestic demand declines sharply, the unemployment in the country is rising and is causing widespread problems for the society at large, which needs to be corrected by the government to ensure economic stability are recovery from recession.

Case Specifics: -

The following are three critical measures which the government of Untied States has taken, towards ensuring that the ill effects of the Corona Virus pandemic from an economic point of view may be reduced as much as possible.

1) Direct Cash Transfer: -

The government of Untied States has extended support to anyone whose income has been below 75000 US dollars. This is done by providing them a direct cash transfer of 1200 US dollar in their accounts with a view to ensuring that their demand is not impacted any further. This direct benefit transfer helps the economy in remaining stable and ensures that the basic necessities of life reach even the poorest sections of the society.

2) Increasing Health Care Expenditure: -

With a view of maintaining labour productivity and to ensure that people in the country do not get sick which would have a huge impact on employability in the region, the government of Untied States has provided over 8.3 Billion Dollars in aid to the health care sector with the help of the "Corona Virus Preparedness and Response Appropriations Act" which aims at providing aid to the Centre for Disease control and also at various state levels to ensure that the country can recover as soon as possible from this health crisis.

3) Tax Reforms through Families Firs Corona Virus Act: -

The act aims at providing leaves for employees and economic assistance for companies which have a strength size of 500 or lesser. This is done through reducing the tax payable by these companies and employer related other obligations to ensure that the companies are not still paying taxes when their revenues remain low.

Such reduction increases the paying capacity of the companies which instead of firing people would continue to stick with them, so as to ensure long term survival and support.

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