The Trump administration’s proposed coronavirus rescue package is reported to be based around a massive payroll tax cut, designed to stimulate the economy along Keynesian lines. Such an approach is futile in the current environment. Unlike in a typical downturn, we should not try to stimulate economic activity as such. In fact, many activities have been brought to a standstill intentionally.

Instead, the goal should be to help vulnerable households and firms bridge the coming weeks and months. An employer-side payroll tax would be helpful to some of these firms, but certainly not to all. Dramatic additional measures are required to keep normally viable firms afloat in the restaurant, hotel, retail, and aviation industries. On the household side, an employee-side payroll tax cut targets exactly the wrong people. Workers who have been laid off or seen their hours cut would not benefit at all from a reduction in a tax they no longer pay.

And of course, none of this will be particularly effective without figuring out how to deal effectively with the public health threat. It is very difficult to do so without better information about the virus, its mortality and morbidity rates, and how widespread infection levels are. As of yesterday, testing rates continued to be disappointingly low — well below even recent administration promises, in fact. Unless we make rapid progress on this front, economic policymakers will to some extent be poking around in the dark.

Steven Hamilton is an assistant professor of economics at George Washington University. This article first appeared at the American Enterprise Institute.

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