While U.S. economists are uncertain of the economic trajectory resulting from mass closures of certain businesses because of COVID-19, Emily Gallagher, assistant professor of finance at Leeds School of Business at University of Colorado-Boulder, said there are ways for small businesses to survive in the approaching unprecedented times.
Gallagher said there was “no way of sugarcoating it,” but rural mountain communities like those in Chaffee County will be especially hard hit because so much of the local economy relies on tourism. Industries that rely heavily on generating mass gatherings will struggle in upcoming weeks. Affected businesses include hotels, restaurants, bars, airlines, cruises, movie theaters and venues.
On the other hand, she said any business that is supported by remote work will do well or even thrive during the crisis, including any online or telecommunication service. Businesses in medical supplies and logistics industries will also more than likely thrive due to high demand.
She said the situation is so unprecedented because it contradicts the U.S. government’s usual goals of developing a stable economy and encouraging citizens to seek employment. U.S. economists have never really seen the government intentionally stop so many aspects of its own economy before.
For business owners who do not have an online store or a to-go option, Gallagher said they should encourage regular customers to purchase gift cards. If applicable, they should also organize a local delivery service if they do not currently have one.
To mitigate costs, she highly recommends applying for disaster loan assistance from the Small Business Administration. The loans are to be used exclusively for payroll and survival.
She said closures could have ripple effects on buying habits even after regulations are lifted. For instance, if a customer begins buying products online instead of in a store, they might continue to do so even if conditions improve.
When it comes to reducing employee hours, Gallagher said small businesses should be creative and base their decisions on their own personal situation. In the meantime, they should avoid laying employees off by cutting costs as much as possible.
“The most important thing is to keep people on the payroll for as long as possible, rather than on unemployment,” she said in a personal statement. “Businesses that don’t lay off will have a ready workforce when the crisis passes.”
She said currently the situation is a recipe for depression unless the government is aggressive in its goal of reformation. One of the biggest failures of the Great Depression was how slow the government acted in the beginning.
Democratic senators rejected a coronavirus stimulus bill Sunday that would have allowed the Treasury to distribute more than a trillion dollars in loans, loan guarantees and investments. They said their reasoning was they wanted more restrictions placed on federal assistance to large corporations as well as more unemployment benefits.
Gallagher said if Democrats are concerned about the Treasury, the authority should be given to the Federal Reserve System, or the Fed and Treasury together, because the Federal Reserve System has shown itself to be nonpolitical.
She said Republicans were hesitant to include the Democrats’ requests because they saw it as expanding an entitlement.
Gallagher said Democrats are right to press for added unemployment benefits because she does not think people realize how pitiful most states’ current unemployment insurance is.
According to Colorado Public Radio, unemployment applicants can replace about 55 percent of their average weekly wages. There is a maximum benefit of about $600 per week with the average being $400 per week. The benefit can last up to 26 weeks, but the time frame has been extended in previous crises.
Though details remain fluid, the legislation would include direct payments of $1,200 per person and $500 to children.
She said while mistakes, waste and fraud will be made during funding distribution, it is a price to pay to save the economy from a vicious downward cycle.
“Speed is vital here,” Gallagher said. “We can catch the cheaters later. The fiscally responsible thing here is to save the economy, period.”
She said one aspect the bill does not address is how to accommodate those without health insurance. Those working hourly service jobs where they interact with people regularly are especially susceptible to the virus. Those without insurance can physically and financially overwhelm hospitals, subsequently overwhelming state bankruptcy courts.
She said to mitigate this, state governments should expand Medicaid.
From our sister paper The Mountainmail at www.themountainmail.com