The importance of consumption: Lack of revenue causes the economy to plummet

The COVID-19 pandemic has caused substantial issues for people around the world.  As college classes are moving online, businesses are closing and people are staying home, the United States economy is taking a large hit. 

Around 70% of the U.S. economy is made up of consumption, Travis Letellier, USD visiting economics instructor, said. Letellier explained consumption is what economists call the money spent on groceries, cars, tuition, haircuts, etc.

Because health professionals are recommending people stay home, Letellier said the stock market and other economic measures will continue to go down while consumers are not spending money. You could also click to read more on comparing prices before making an investment and saving money.

“The good news is that when things return to normal, this will stimulate the economy … We will always have ups and downs in the economy — there are always good times and bad times, but the U.S. is one of the strongest and most resilient countries in the world,” Letellier said in an email interview with The Volante. “Even when our economy slows down like it is now, we have the capacity to rebound quickly.” 

Letellier said the most challenging part is the uncertainty of the situation. He said as more information becomes available and people have a greater understanding of the situation, the economy will start working again.

The hard part, he said, is waiting for answers. The effects COVID-19 will have on the economy are still unknown, but Letellier said it’s important to start immediate short-term measures to keep the economy afloat. 

“We need to make sure that small businesses and our local economies are getting the cash they need to pay their employees and keep their doors open,” Letellier said. “The Federal Government is working so hard right now on making sure small businesses can get loans and grants to pay their leases, their insurance and pay their workers. It is also incredibly important … to ensure everyone has enough income to buy groceries, pay the rent and buy their prescriptions.”

Congress is currently working on a stimulus plan to help relieve financial burdens caused by COVID-19. 

Senate Majority Leader Mitch McConnell called COVID-19 “the most serious threat to Americans’ health in over a century and quite likely the greatest risk to America’s jobs and prosperity that we’ve seen since the Great Depression.”

Right now Congress is debating a resource plan for Americans. This plan, according to abc11, would give direct payments to most Americans, extend unemployment benefits and create a $367 billion program for small businesses. 

This small business program would give business owners the chance to continue paying their employees. 

This plan, as proposed right now, will give a one-time payment of up to $1,200 per U.S. taxpayer, or $3,000 for a family of four.

“Because we don’t know how long folks will be out of work, it is incredibly important their income is supplemented until they can go back to work,” Letellier said. 

For a small town like Vermillion, Letellier said small businesses will be affected by the loss of customers. He said once it’s safe to do so, students and community members should support Vermillion-run businesses to improve the local economy. 

“If we support (local businesses), they can pay their workers who put even more money back into the Vermillion community,” Letellier said. “We’re all in this together, and it will take all of us supporting our local workforce to make sure that USD and Vermillion come through this economic contraction stronger than ever.”