May 15 is eight weeks away. How many of the officials setting emergency policy have ever run a small business? Very few, I suspect. To be clear: Two months is not a hiatus; it is a death sentence for small business.
How can the government help? Each emergency-related decision needs to be revisited in shorter and predictable periods of time as the science dictates. Mass testing for coronavirus will become available. We need to calibrate for the facts as they develop.
Let’s all keep social distancing, as the experts say it will reduce spread, but let’s revisit curfews and gathering restrictions in two-week segments. Give us businesses hope that we might reopen before May 15. Give parents hope that their children will go back to school before the end of the academic year. Parents of the 22 million children who receive free and reduced-price lunches could particularly use that hope. It might be illusory, but maybe not. (Remember, social distancing is supposed to work.) Americans can do anything for a week or two, but 60 days is a lifetime. Businesses will go under, and kids will go on unsanctioned play dates. And let’s not even talk about teens and young adults who are supposed to forgo social life and dating for that long.
The math is simple. There are roughly 30 million small businesses (firms with fewer than 500 employees) in the United States, representing 49 percent of private-sector jobs. Most businesses — big and small — have a profit margin of roughly 10 percent to 20 percent (if they are lucky). A two-month hiatus means their profit is gone for the year. So, say we aim to break even. But to break even, we must rebound fully after the two-month “hiatus.” Who believes that will happen? None of my small-business CEO friends.
So now we are faced with a loss. What to do? Take a small-business loan? Why would I create more debt in uncertain times? Think about it: For restaurant owners, the biggest expense after employees is rent. Are they going to borrow money so they can just pay the landlord? Why not close shop and declare bankruptcy? Maybe start again with a much lower lease if the economy revs back up a year from now. If you are near retirement or near the end of your lease, this decision is easier: Quit now while you still have a little cash left. Layoffs, which are already happening, will be enormous and widespread by the beginning of next week. Bankruptcies are certain to follow.
As Elon Musk told Tesla employees, coronavirus panic is worse than the virus itself. Virus infections can at least, eventually, be quantified. But who is going to quantify the number of deaths from unemployment stress, food insecurity, depression or lost health insurance — plus the spike in suicide rates and heart angina from the stress of being laid off or furloughed?
Without fast action, our country is going to experience record unemployment levels, possibly higher than even those in the Great Depression. Government needs to act quickly, but it also needs to be able to revise quickly. Set policies, and then amend as conditions warrant. The notion that the nation will be able to freeze small business in place for two months and restart it with ease is preposterous.
While I believe that the United States has the smartest scientists in the world, I don’t believe anyone can predict where the country will be 60 days from now. Let’s not try. Let’s leave the door open to revise policy and loosen restrictions.