Question

Many governors determined that shutting down part of their states' economies was the best response to COVID19. We are not debating that. However, since such shutdowns led to tremendous unemployment, Mr. Trump stepped in with some fiscal policy measures. Research them and discuss their efficacy amongst yourselves.

Answer 1

Covid-19 & Trump’s fiscal policy measures
To tackle the ongoing financial crisis due to covid-19, Trump’s administration has suggested and implemented various fiscal measures as tax cuts and various reductions in the corporate and the business sectors. Even if a usual economic situation can improve the performance of the economy by the reductions in taxes and other activities, a situation like the ongoing one is not that easy to be managed by these kinds of payroll tax cuts and other tax exemptions.
The payroll tax cuts have the limitations of encouraging the economy to retain its efficiency. A large group of people already unemployed will not be benefitted from the mode of fiscal policies. Direct transfer of funds through fiscal policies only can help the employees and everyone to continue demanding goods. As the economy needs to concentrate in balancing the level of demand, payroll tax cuts is less efficient to manage the demand crisis. A reduced level of demand can further reduce the employment level even after being granted the tax reduction since they may not encourage demand. Employees lack the money to demand and purchase goods. Payroll taxes being not helping the employees to increase their income or most of them are not availing income in the current period of economic crisis. The immediate cash flow crisis has huge impact on the demand side of the economy. The tax cut will be less effective in encouraging consumer demand because there is no direct benefit to them to encourage the demand. Thus the tax cuts being and indirect benefit to the economy, they fail to meet the demand from the consumer sides to demand on goods and services.