We must prepare now to respond on a scale like the financial crash of 2008 when the government effectively nationalized the entire global financial system. Dozens of new programs were created virtually overnight to lend, spend, guarantee or otherwise make available at least $29 trillion to the financial system to stop the crisis. No less should be done now to save Main Street families from the potential disaster caused by the coronavirus pandemic.
What could happen?
Tens of millions of Americans – if not more — could be quarantined and have no income for months while facing widespread panic and an increasingly lethal pandemic. Relatively quickly, large parts of the U.S. economy could shut down, causing unemployment and bankruptcies to skyrocket. As the virus and panic spread, entire cities and regions can expect to be closed, as happened in China and is happening now in Italy.
Effectively, large parts of the United States will be sheltering in place, mostly in their homes.
As a result, tens of millions of people will be out of work. As consumer purchases plummet, every business that depends on customers, particularly small businesses, will rapidly fail, putting many more people out of work.
Given that 70% of U.S. GDP is consumer-driven, the impact cannot be overstated. The economic devastation from what could quickly become historically high unemployment will be compounded by the dramatic drop in tax revenue, effectively defunding the government at a time of greatest need. Thus, the federal government will have to step in as it did in the 2008 financial crisis.