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The Bridge to the Post-pandemic World Is Collapsing

CORONA WATCH--Outside of Boston, a marketing company is struggling to figure out how to cover its bills. In Indiana, a dance studio is waiting on three emergency-loan applications. In Baltimore, a deli is closed and desperate for help.

The government is engaged in an unprecedented effort to save such companies as pandemic-related shutdowns stretch into the spring. But Washington’s policies are too complicated, too small, and too slow for many firms: Across the United States, millions of small businesses are struggling, and millions are failing. The great small-business die-off is here, and it will change the landscape of American commerce, auguring slower growth and less innovation in the future.

Small businesses went into this recession more fragile than their larger cousins: Before the crisis hit, half of them had less than two weeks’ worth of cash on hand, making it impossible to cover rent, insurance, utilities, and payroll through any kind of sustained downturn. And the coronavirus downturn has indeed been shocking and sustained: Data from credit-card processors suggest that roughly 30 percent of small businesses have shut down during the pandemic. Transaction volumes, a decent-enough proxy for sales, show even bigger dips: Travel agencies are down 98 percent, photography studios 88 percent, day-care centers 75 percent, and advertising agencies 60 percent. 

This deep freeze has posed a singular policy challenge: The government has never before been tasked with figuring out how to put a majority of the country’s businesses on life support. “We know how to support the financial system. It goes all the way back to Walter Bagehot,” Satyam Khanna, of the Institute for Corporate Governance and Finance at NYU’s School of Law, told me, referring to the 19th-century British thinker. “There’s a playbook to follow. What we don’t know how to do, or had no idea how to do, is provide direct support to your local coffee shop at scale.” (Read the rest)  

-cw