by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The U.S. economy is in trouble, and if you can believe it, that trouble isn’t simply the closure of Main Street, the massive number of nationwide layoffs, and the danger of financial crisis we’ve all heard about. As companies run out of cash, pushing them toward insolvency, our country’s business-to-business trust is at risk of coming apart, tearing and ultimately collapsing the delicate system that keeps industries as diverse as farming, chemicals, and aluminum profitable and solvent.
Just beyond — and in the midst of — the public health and financial liquidity crises is the expansive and potentially devastating solvency crisis. It won’t be solved by the Federal Reserve or Washington stimulus, although there is a way to draw from an important Depression-era lesson and hold it at bay.
While government and scientists across the planet rush to find a vaccine or treatment, the harsh medicine we’ve prescribed is turning off much day-to-day economic activity. Normal things like work or family trips, eating out, going to a bar, or even regularly driving our cars have all ground to a crawl and, in many instances, a complete halt.
America’s imperious airlines don’t inspire much public empathy, but they have run at a massive loss for weeks and over the course of a few months will become insolvent. The problem for the American public, beyond the obvious, is the airlines’ solvency crisis won’t stop with them, nor with our local shops, regular barbers, favorite restaurants and bars, or any of the other industries in the daily news. The solvency crisis is going to continue throughout the pandemic like an aggressive tumor, spreading deeper and deeper into the lifeblood of our economy.