This past week saw the United States Congress at its best—Republicans and Democrats working together to achieve an historic, $2 Trillion response to the coronavirus pandemic. While Spirited Reasoners applaud the spirit of the legislation—i. e., placing the good of the nation above partisan politics—the stock markets’ wildly enthusiastic response, midweek, left us shaking our heads in disbelief.

A few observations:

1. Despite the obvious necessity of the federal government injecting our economy with massive amounts of liquidity and stimulus money, no degree of spending can rescue certain major industry sectors over the medium, and even longer, term. For example, how many Americans have already canceled, or decided not to book, cruises and other long-distance vacations? No amount of money will encourage anyone to brave the lines at TSA checkpoints, wait in crowded airport gates, or risk being involuntarily quarantined on board a ship, airplane, train, or even in a luxury hotel. Now, add to the travel industry all those indirect employees who earned their living servicing transportation vehicles, cleaning hotel rooms, catching fish for seafood restaurants, … and the list is endless. There are some types of economic activity that cannot be “stimulated.”
2. Some industries may face longer term, even permanent, damage. How many Americans will now think twice before attending a crowded sporting event, musical concert, movie theatre, or other dramatic production? How many people will rethink trips to theme parks and previously crowded resorts? How long with such rethinking persist?
3. A huge chunk of the $2 trillion will be owed, and honestly paid, to landlords by laid-off tenants. According to ApartmentList.com, the average monthly rent for a two-bedroom apartment in the United States was $1,194 last year, about the size of one stimulus check for one individual. Two people living together could pay rent for two months. These folks will, of course, welcome the checks when they finally arrive. But when that money finds its way into their bank accounts, most of it will not be used to “stimulate” anything. Instead, those unemployed, indirect victims of Covid-19 will need the money to gain a short reprieve from the terms of their respective leases.
4. Americans who own their homes will do much the same thing. But, instead of using their stimulus checks to pay landlords, they will use their checks to make one or two mortgage payments to major financial institutions.
5. Once the money is spent—however Americans choose to spend it—it will be gone, not available to stimulate anything in May, June, July, August, or beyond.

Smart readers know this list could go on. The point here is not to sound negative or overly pessimistic. On the contrary, Spirited Reasoners maintain a healthy belief in the resiliency of the American economy.

The point is that we need to keep our seatbelts fastened for at least six more months of economic turbulence and dislocation. More likely, twelve to eighteen. Things are likely to get much worse before they get better.