The ongoing Covid-19 pandemic is causing a lot of problems. There is obviously the healthcare aspect of it. Many governments are having problems getting enough healthcare equipment. But the pandemic is also causing problems for the economy. Many countries are struggling with their economies. The situation is getting worse. Since many businesses are not running right now, things might just continue to get worse.
Covid-19 Pandemic: Lack Of Government Funding
The governments around the world have to spend a lot of money right now. People are looking to their governments to help them during this time. Countries like the USA are giving citizens $1200 each to help the people. They are planning to give even more aid. In countries like India, people are getting many subsidies from the government. But this is putting a lot of pressure on the financial side of the governments. Many governments already have fiscal deficits and the increased spending is increasing the deficit.
Governments do not have many ways of earning money right now. The companies that the governments own are not working right now. Since many people are now getting unemployed, they will also not be able to collect enough taxes anymore.
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Covid-19 Pandemic: Economic Crisis
The world economy is heading towards a depression. Some are saying that the situation could be the worst since the 1930s. The Great Depression took place in the 1930s. The US had 20 Million new people unemployed in April 2020. This is the highest ever in a month. Many businesses are also getting many losses. Since stores are closes, there is no revenue for those businesses. Governments will have to take up a big role during the recession.
Covid-19 Pandemic: Introduction Of A Wealth Tax
One of the ways that economists are suggesting to help the government is to introduce a wealth tax in many countries. Since poor people will require many benefits, and the government will have to provide the benefits, a higher tax on the wealthy will help the governments raise more funding. But there is a problem with this because people might not accept the tax easily. A lot of political discussions will have to take place to make this happen. Hence, it may not be possible to make it happen.
But the governments will have to seriously consider the option of a wealth tax, as well as many other options. It will take many policy decisions from governments to recover from what will be a big recession.
