Temporary closed signage is seen at a store in Manhattan following the outbreak of COVID-19, in New York City, March 15, 2020, photo by Jeenah Moon/Reuters

commentary

(CNN)

The Danger of Converting a Health Crisis into a Financial Crisis

Temporary closed signage is seen at a store in Manhattan following the outbreak of COVID-19, in New York City, March 15, 2020

Photo by Jeenah Moon/Reuters

The impact on the economy from the coronavirus will be substantial. And while the impulse to do something to help companies right now is both natural and well-intended, there is a danger that policies designed to help businesses weather the current health crisis could lead to defaults on loans or further government intervention, sowing the seeds of a larger financial crisis in the future.

The government's $2 trillion relief package includes $500 billion in assistance to large corporations, $350 billion in new loans for small businesses and over $600 billion for individuals, including $300 billion in cash payments. Some measures in the package are aimed at assisting companies affected by the drastic curtailing of economic activities, such as travel, dining and shopping. These measures are expected to shore up the economy and prevent large-scale loss of jobs. However, this crisis comes at a time of record corporate debt...

The remainder of this commentary is available on cnn.com.


Krishna Kumar is the director of international research at the nonprofit, nonpartisan RAND Corporation and director of the Pardee Initiative for Global Human Progress at the Pardee RAND Graduate School. Shanthi Nataraj is a senior economist and director of the Labor and Workforce Development Program at RAND. Jonathan Welburn is an operations researcher at RAND.

This commentary originally appeared on CNN on April 13, 2020. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.