The best stimulus is coronavirus testing kits

If most Americans who wanted a test could get one, and if people who tested positive stayed home and sought medical attention, fear of going out wouldn’t disappear, but it would dissipate. Think of it as a super-effective form of fiscal stimulus. Test kits are ridiculously cheap compared with the GDP and job losses they might forestall.

The president keeps chastising the Federal Reserve for not lowering interest rates, but rate cuts wouldn’t help much. No one knows how long the pandemic will last, but it’ll likely be months or quarters, not years. Interest-rate cuts have little economic impact until a year or two passes. It’s too late for monetary policy.

It’s also too little. Rate cuts stimulate the economy by encouraging people and businesses to spend more on interest-sensitive items like houses, cars and business equipment. People huddling at home and businesses watching their sales drop aren’t prime candidates to spend more because borrowing gets cheaper. Monetary policy is thus less powerful than usual. To fight past recessions, the Fed has typically cut rates 3 to 7 percentage points. Rates are too low to do that now.

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