I am attempting to ask this question as impartially as possible, setting aside the political and social ramifications.
Given: the shut down that began on March 2020, as a response to a contagious virus, known as COVID-19, decimated state and local tax revenues.
The Governor in reaction to discovering his tax revenues were well below his expectations asked all state employees to take a 10% pay cut. Additionally, he is asking for teachers to be retrained so that they can video conference their classrooms.
Meanwhile, some local politicians are reacting by drafting a stimulus bill.
I understand businesses respond to a crisis like this by not hiring as many employees and reducing salaries until they can ramp back up to pre-crisis mode.
My question is which of the following approaches is better for the economy at large, and what are their economic effects and why? And how long would it take for each one of these approaches to stabilize the economy? Is there another approach that I am missing?
- A) 10% across the board cut in salaries to state employees
- B) A laissez-faire response
- C) A stimulus bill