This Economic Crisis Cannot Be Compared To 2008-09

As Congress grapples with the need to enact even more spending to counteract the economic devastation of the novel coronavirus pandemic, it must face the fact that this is not the same crisis the country faced when the housing market collapsed in 2007, and the remedies employed then do not apply now.

When the housing bubble burst, the immediate concern was the stability of big business -- specifically Wall Street banks and investment firms and the auto industry. Congress responded by bailing out both. The thinking was that those enormous corporations could not be allowed to fail or everyone would suffer, including small businesses and workers.

This time is different. Instead of a major financial market collapsing, the entire economy shut down, virtually overnight. Millions of people saw their jobs simply disappear as their employers were forced to close.

Congress responded with stimulus checks to individuals and greatly expanded unemployment compensation. Some assistance was provided to small businesses in the form of forgivable loans intended to keep paychecks flowing to workers. But more is needed. Small-business owners are already giving up and closing their doors for good, and more are likely to follow.

Meanwhile, big business is doing quite well. The stock market -- which reflects the fortunes of Wall Street, not Main Street -- suffered losses, certainly, but is rebounding with each hopeful report of a potential new treatment or progress on developing a vaccine. Those rebounds do little for small businesses and nothing for rank-and-file workers, but reward corporate executives handsomely.

Economists refer to this phenomenon as a "V-shaped recovery" -- rising as steeply as it fell after hitting bottom -- but that is good news only for the investor class, not for most Americans.

CNBC financial analyst Jim Cramer says the pandemic has led to "one of the greatest wealth transfers in history," and he means upward, not downward. A V-shaped recovery applies only to the stock market, he says, not to the economy as a whole. The bigger the business, the better it is doing as the economy begins to reopen, he says, while small businesses fall by the wayside.

This the reality that Congress must address, and soon. The challenge is to find a balance between protecting public health and keeping businesses alive -- and, by extension, putting people back to work.

At the same time that small retailers and others are facing oblivion, state governments are facing huge shortfalls in revenue. That means essential government services such as education and health care are at risk.

That means more federal help -- not in the form of checks to individuals but aid for governments and for employers -- must be forthcoming in the next round of stimulus spending.

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